Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)

Order for Second Reading read.

To be read a Second time upon Thursday next at Seven o'clock.

Oral Answers to Questions — HOME DEPARTMENT

Police (Cheshire)

Mr. Peter Morrison: asked the Secretary of State for the Home Department what is the present establishment of the Cheshire police force; and to what extent it is up to strength.

The Under-Secretary of State for the Home Department (Dr. Shirley Summerskill): On 31st January the establishment was 1,770 and the strength was 1,596.

Mr. Morrison: Is the Minister aware that my constituents and I are grateful for the tremendous work done by the Cheshire Constabulary in its fight against crime? Does she agree in principle that the most effective deterrent against crime, particularly in urban areas, is to have policemen walking around on the beat, rather than driving around?

Dr. Summerskill: Yes, I agree with the hon. Gentleman's remarks. It is up to local police forces to make their own arrangements in that respect.

Mr. Rathbone: I welcome the Minister's statement about the Cheshire police force, but we are not quite so sanguine in Sussex. Is the Minister aware that the police force in Sussex, although it is under strength, is doing a magnificent job in detecting crime? What plans has the Minister for ensuring that the Sussex police force is brought up to strength, for improving the conditions of employment, and for maintaining recruitment?

Dr. Summerskill: Every effort is being made to increase the strength of the police service. I am glad to say that recruitment over the last few months has been very encouraging, and there has been some reduction in wastage.

Licensing Laws (Erroll Report)

Mrs. Chalker: asked the Secretary of State for the Home Department if he is yet able to state what plans he has for implementing the recommendations of the Erroll Committee's Report.

Mr. Hal Miller: asked the Secretary of State for the Home Department when changes may be expected in licensing hours on the lines suggested by the Erroll Committee.

Dr. Summerskill: There have been serious differences of opinion about a number of the recommendations in this report, and these need to be carefully weighed. My right hon. Friend is not yet in a position to make a statement.

Mrs. Chalker: Does the Minister consider that an extension of drinking hours up to a set total limit within any one day will hinder or help the increasing drunkenness that we can observe at and after closing time every night?

Dr. Summerskill: That is one of the highly controversial features of the Erroll Report. It is known that the problem of drunkenness and alcoholism, especially among young people, is substantial. The Government, therefore, have to give careful thought to any change in the law which might aggravate it.

Mr. Lipton: Is my hon. Friend aware that I received an exactly similar answer to a question which I asked on 19th December last? Is she aware that the number of tied houses is increasing, the number of licensees is diminishing, exhorbitant rents are being demanded from licensees by brewers, and a growing monopoly situation is being created?

Dr. Summerskill: As my hon. Friend says, these problems do exist. They were all taken into consideration by the Erroll Committee and are dealt with in the report. The fact remains that there is great difference of opinion about many of the committee's recommendations.

Mr. Miller: Will the Department now emerge from the hibernation which it has endured for more than one winter, recognise that the first tourists of spring are with us, and allow the people of these islands to join them and make them welcome at any hour they wish?

Dr. Summerskill: I can only say that for every one person who agrees with the hon. Gentleman there are many who disagree.

Mr. Rees-Davies: I recognise that there are disagreements, but there is a

large measure of agreement that the Home Secretary should introduce legislation and that the licensed trade is ready for an extension of hours, provided that a global total is chosen by the trade. Would not that action secure greater liberalisation and, at the same time, effective control? There has been a long delay, for which we are all responsible. I do not blame the Government for that.

Dr. Summerskill: The report was debated in the House of Lords in March 1973 and in this House in October 1973. I assure the House that the comments made by hon. Members are being carefully considered.

Sir Bernard Braine: Is the hon. Lady aware that many of us applaud the cautious note which she has sounded this afternoon? In view of the rising trend of offences involving drunkenness and the increase in alcoholism among young people, is there not a strong case for not taking action until the full social consequences of the present trends are fully assessed?

Dr. Summerskill: I should inform the hon. Gentleman that in 1973 there was an increase in offences of juvenile drunkenness amounting to 32 per cent. in the male 14–17 age group.

Firearm Certificates

Mr. Farr: asked the Secretary of State for the Home Department what is the total number of firearm certificates in force in England and Wales at the latest available date; and how this compares with 1970.

Dr. Summerskill: The number of firearm certificates in force in England and Wales on 31st December 1974 was 185,865. The corresponding figure for 1970 is not available, but the figure for 1971 was 190,649.

Mr. Farr: I thank the hon. Lady for that information, which shows a slight decline in the number of licensed firearms. Will she say when the present review of firearm fees in the United Kingdom will be completed? Will she assure the House that any decision announced by the Government will not amount to a quadrupling of the fees required to possess firearms, as happened recently in Northern Ireland?

Dr. Summerskill: The firearm fees were set in January 1971 and various bodies are now being consulted about a possible increase. In the light of their comments, my right hon. Friend the Home Secretary will decide whether an increase is necessary.

Mr. Ford: Is my hon. Friend aware that a useful body to consult on these matters would have been a central advisory committee on the control of firearms—a body which I have suggested from time to time? Is it not more important to control the pool of illegally-held weapons, including automatic and other weapons, rather than the pool of the legitimately-held weapons, which includes only single-shot and semi-automatic weapons?

Dr. Summerskill: I appreciate my hon. Friend's concern. Every opportunity is made to tackle the problem of illegally-held weapons, but it is a difficult one. Even with certification of arms, they still get into the hands of irresponsible and unqualified people.

Shrewsbury Pickets

Mr. Bidwell: asked the Secretary of State for the Home Department what was the date and reasons for the transfer of the two Shrewsbury pickets, Messrs Warren and Tomlinson, from Sudbury, Derbyshire, Open Prison to closed prisons.

The Secretary of State for the Home Department (Mr. Roy Jenkins): Mr. Warren and Mr. Tomlinson were transferred on 4th February to Lincoln and Leicester Prisons respectively because their refusal to work or wear prison clothes meant that their continued presence in an open prison was disruptive of the co-operation between prisoners and staff upon which the régime in open prisons is essentially based.

Mr. Bidwell: I thank my right hon. Friend for that information. Had some of my hon. Friends been able to get there a little earlier, they may have had a profitable chat, which might have prevented these men having to be removed from the open prison. I thank my right hon. Friend for the facilities which his office is making available to my hon. Friends the Members for Birmingham, Selly Oak (Mr. Litterick) and Sheffield,

Hillsborough (Mr. Flannery), who are to visit the Leicester and Lincoln Prisons tomorrow as a mark of solidarity. Has he noticed that the executive of the Transport and General Workers' Union—my union—yesterday unanimously asked the TUC to call a national strike in support of the campaign to obtain the release of these men?

Mr. Jenkins: In accordance with precedent I always allow hon. Members of this House to see prisoners who wish to see them. My hon. Friends so concerned are able to go to Lincoln and Leicester. On the last part of my hon. Friend's supplementary question, I saw the report to which he referred but I remain of the opinion, which will not surprise him or the House, that I do not believe that I should exercise my difficult judgment in these matters in response to any campaign, whether political or industrial.

Mr. Carlisle: Does the Home Secretary agree that, these two men having been convicted, following a proper trial, of criminal offences under the normal criminal law, and their appeal against both conviction and sentence having been dismissed, the vital thing is that they should be treated in prison in exactly the same way as is any other prisoner convicted of a criminal offence?

Mr. Jenkins: The hon. and learned Gentleman knows that I have made my position on this matter clear.

Shoplifting

Mr. Greville Janner: asked the Secretary of State for the Home Department what percentage of women who pleaded not guilty to shoplifting charges before Crown courts were acquitted by the jury concerned in the last year for which records are available.

The Minister of State, Home Office (Mr. Alexander W. Lyon): The latest year for which detailed figures are available is 1971, when 62 per cent. of women who pleaded not guilty to charges of shoplifting at the Crown courts were acquitted. I shall provide my hon. Friend with more up-to-date information as soon as I can.

Mr. Janner: Does the Minister feel that the persistently high acquittal rate for this offence shows that the law on


shoplifting is not being properly administered and that too many innocent people are being put at risk in respect of this very prevalent offence?

Mr. Lyon: As a result of the recommendations of the working party in 1973, chief police officers have been consulting to see whether there should be greater uniformity in the way in which prosecutions are brought. Although my hon. Friend says that the acquittal rate is persistently high, he will note that it compares with an average of about 51 per cent. of all criminal offences in the Crown courts, and in relation to the totality of shoplifting offences only 5 per cent. of those charged with the offence are acquitted.

Miss Fookes: Does the Minister agree that the layout of many shops on the help-yourself principle is an inducement to shoplifting? Will he examine that aspect?

Mr. Lyon: That aspect is rather outside the confines of the Home Office. It has been examined on earlier occasions by shopkeepers and other interested bodies. There are certain conflicts between the consideration of amenities for shoppers and the ease with which people who wish to steal can do so.

Children and Young Persons Act 1969

Mr. Edward Gardner: asked the Secretary of State for the Home Department what steps he is taking, and what progress is being made, to improve the working of, and to reform, the Children and Young Persons Act 1969.

Mr. Roy Jenkins: I would refer the hon. Member to the reply given on 24th January to a Question by the hon. Member for Rochdale (Mr. Smith).—[Vol. 884, c. 511.]

Mr. Gardner: Is the right hon. Gentleman aware of the growing disquiet felt throughout the country, especially in bodies such as the Magistrates' Association, at the dramatic rise in the number of crimes committed by a small but hard core of persistent juvenile offenders? Does he also agree that the juvenile courts now find themselves almost powerless to deal with this type of offender? Will he think again and consider the wisdom of setting up an interdepartmental com

mittee to consider the law on this matter and its administration?

Mr. Jenkins: I am aware of disquiet on this matter. A couple of weeks ago I received deputations from the Magistrates' Association and the Justices' Clerks' Association, and this week from a body representing a somewhat different point of view—the Social Service Officers' Association. Anybody who says he is wholly satisfied with the situation would be complacent and foolish. On the whole the fault lies in lack of resources under successive Governments more than in the failure of concept. But there is a problem relating to secure accommodation for a limited number of very difficult juveniles. I am aware of the situation and will consider the matter as constructively as I can.

Mr. Sims: Does the Minister accept that there is frustration not only among the magistracy but in a wider sphere, especially regarding the lack of secure accommodation, and that because of this there is an increasing number of certificates of unruliness issued by the courts? Does he recognise that an increasing number of young people are sent to borstal because the courts find that there is no other way in which to ensure secure accommodation for them? Does he accept that this matter must be dealt with as a matter of urgency?

Mr. Jenkins: Yes, I do. As I indicated in my reply to the question of the hon. and learned Member for South Fylde (Mr. Gardner), I accept that there is a real problem here. It is sometimes easier to state the problem than to provide the exact answer to it. The old approved school system, which it is fairly generally agreed, had run its course, was not completely successful. On the whole, the change was desirable. However, there are imperfections, at the margin at any rate. I am aware of that and I shall do what I can to improve it. However, I cannot promise a magic solution.

Mr. Watkinson: Will my right hon. Friend bear in mind that there is widespread concern at the number of young people who are spending time in adult prisons? For that reason will he hasten his plans to build the secure establishments to which he referred?

Mr. Jenkins: In a budgetary and other sense, the plans are a matter for my right hon. Friend the Secretary of State for Social Services, and she has announced certain plains for improvements in this respect. Within the necessarily severe restraints on public expenditure at present, there is a limitation on what both she and I can do.

Police (Corruption Allegations)

Mr. Corbett: asked the Secretary of State for the Home Department from what dates the five Metropolitan Police officers holding the ranks of chief inspector, inspector or sergeant have been suspended from duty in connection with allegations of corruption arising from the pornographic trade in London's West End; and if he will make a statement.

Mr. Roy Jenkins: The suspensions began from dates between December 1973 and May 1974. For reasons I have already explained to my hon. Friend, it would not be appropriate for me to make a statement.

Mr. Corbett: Does my right hon. Friend appreciate that it is precisely because some senior officers in the Metropolitan Police force were allegedly so successful in covering up their activities allegedly involving the payment of £5,000, for example, in the opening of a pornography shop, that some hon. Members are concerned that a further cover-up attempt may now be tried? Will he consider whether it would not be in the best interests of both the police and the public that this matter should be handed over to an independent inquiry, so that at least the fears of a cover-up can be allayed?

Mr. Jenkins: This matter is being rigorously investigated. I think that if I were to make a statement at present it would be prejudicial both to the individuals involved and also to the progress of a rigorous inquiry, which I am sure both my hon. Friend and the House are anxious to see carried forward.

Mr. Flannery: Is my right hon. Friend aware that there is grave disquiet among the general public that every time anything involving the police occurs, the inquiry is always conducted by the police themselves? For instance, some time ago, in Sheffield, the Labour movement wanted a public inquiry into a case about pickets

in which the police were concerned. However, as usual, the people were fobbed off with the idea that there would be a police inquiry into their own conduct. Does my right hon. Friend consider that this is unsatisfactory and that in future there should be some other method of inquiry in cases where the general public is involved?

Mr. Jenkins: My hon. Friend has raised a number of issues which go considerably wider than the original Question. As regards complaints by the public, I have indicated, following the view taken by my predecessor, the right hon. Member for Carshalton (Mr. Carr), that I am in favour of the introduction of an independent element. I wish to see that done. Another Question on the Order Paper refers to this. However, as regards the investigation of certain allegations against police officers who have been suspended, I do not think that my hon. Friend is living in a real world if he thinks that the present Commissioner of the Metropolitan Police is not extremely vigorous in pursuing, rooting out and disciplining such behaviour on the part of any officers.

Hotels (Fire Precautions)

Mr. John Page: asked the Secretary of State for the Home Department whether he will make regulations requiring hotels and boarding houses to display provisional fire precautions and escape notices in bedrooms and public rooms forthwith, in premises where certification under the Fire Precautions Act 1971 has not yet been issued.

Dr. Summerskill: We are referring this proposal to the Joint Fire Prevention Committee of the Central Fire Brigades Advisory Councils for England and Wales and for Scotland, which advises my right hon. Friend on matters of this kind.

Mr. Page: I am grateful for that answer, as far as it goes, but does the Under-Secretary of State realise that people in general think that it is crazy that tens of thousands of hotels and boarding houses are not required to put up fire escape routes or other fire notices? Will she ask the committee to investigate this as a matter of urgency, and request her right hon. Friend to act on its decision as quickly as possible?

Dr. Summerskill: The process of fire certification is being speeded up as much as possible. However, hotels which have already provided satisfactory fire precautions voluntarily but have not yet been granted fire certificates cannot display them. The matter will certainly be considered by the advisory council.

Mr. Ronald Atkins: Does my hon. Friend agree that progress in the implementation of the provisions of this Act is most unsatisfactory and that many people have suffered a most horrible form of death through lack of provision?

Dr. Summerskill: I agree that the rate of certification is not as fast as we would like it to be. However, everything possible is being done to speed it up.

Mr. Townsend: Is the hon. Lady aware that in Greater London there is a scandal as a result of the long time taken to carry out basic inspection? What will she do to speed up the process in Greater London?

Dr. Summerskill: Part of the problem is the manpower shortage. There is also the problem of getting the structural alterations carried out. There are often delays on both counts.

Departmental Staff (Equality of Opportunity)

Mr. William Hamilton: asked the Secretary of State for the Home Department if he is satisfied with the progress made towards equality of opportunity for staff within his departmental responsibilities.

Mr. Roy Jenkins: In general, yes, Sir.

Mr. William Hamilton: That is satisfactory, though it may not be a good omen that all my hon. Friend's advisers in the Box today are men. Will he give an undertaking that if he is satisfied with the position in his Department he will make representations to the Department of Education to make sure that single-sex schools are phased out of the educational system, since it is quite clear from the behaviour in this House in the past week that they produce some very dubious citizens?

Mr. Jenkins: I am in close touch with my right hon. Friend the Secretary of State for Education. I would not wish

to advise him too closely upon his departmental responsibilities.

Mr. Mather: As regards equality of opportunity, does not the right hon. Gentleman agree that in recent days the hon. Member for Fife, Central (Mr. Hamilton) has had more than his fair share of equality of opportunity?

Mr. Jenkins: No. I think that the House benefits from the expressions of my hon. Friend.

Police Interrogations (Mentally Handicapped Persons)

Mr. Christopher Price: asked the Secretary of State for the Home Department whether he is satisfied about the admissibility before the courts of statements made by mentally handicapped adults and children during police interrogation.

Mr. Alexander W. Lyon: We have no reason to think that the law of evidence is unsatisfactory in this respect.

Mr. Price: That is a very disappointing answer. Is not my hon. Friend aware that ever since the Timothy Evans case there have been some disquieting cases of this kind, including the Confait case, which involved one of my constituents and which my hon. Friend is now considering? Is he aware that in recent years judges have been using their discretion to exclude evidence less and less? Will he seek to smile upon the Bill which I introduced into Parliament yesterday, provided that suitable adjustments are made to it?

Mr. Lyon: I always do my best to smile on any representations which my hon. Friend makes to me, including that which he has mentioned. All I can say about his concern over this aspect of the law of evidence is that he has pointed to the protection which already exists, namely that the judge can exclude evidence or a confession which he thinks has not been acquired voluntarily. However, I do not think that it is necessary to extend the range of the law of evidence at present.

Police (Complaints)

Mr. Ian Mikardo: asked the Secretary of State for the Home Department when he proposes to introduce legislation


to give effect to his policy to introduce an independent system for considering complaints against the police.

Mr. Roy Jenkins: As soon as the consultations, which are well advanced, are complete and parliamentary time can be found.

Mr. Mikardo: I am grateful for that answer, and happy to hear that the consultations are going well, but does my right hon. Friend appreciate that nothing would do more to restore and to improve confidence between the public and the police than the implementation of some system along these lines? If my right hon. Friend appreciates that, as I am sure he does, will he get on with the job as quickly as possible? It has dawdled a very long time.

Mr. Jenkins: In relation to the length of time that it has been under discussion, it has not dawdled for an immense time under me, though I should not wish to see it dawdle at all. There are a few points remaining to be settled in consultation. There is the problem of avoiding any question of double jeopardy—to which the Police Federation attaches great importance—while providing adequate powers to chief officers to maintain discipline over their forces and to investigate most rigorously. This bears upon the previous Question, concerning matters of discipline and possible corruption within the police. I hope that we can find a satisfactory solution. I should then wish to bring forward the legislation as quickly as is reasonably practicable. I note, as I am sure the House will, that Lord Justice Scarman, in the course of what I thought was a very distinguished report, lent his support to this view.

Mr. Maxwell-Hyslop: Will the right hon. Gentleman see that in any revised procedure for investigating complaints there is effective provision for punishing those whose complaints are shown to be not only unfounded but maliciously inspired?

Mr. Jenkins: Certainly we wish to discourage complaints which are unfounded. It is a little difficult to have any effective system in which someone who complains is positively punished. I am not sure what the hon. Gentleman has in mind, but the implications sound a little far-reaching to me.

New Smoking Materials (Experiments)

Mr. Terry Walker: asked the Secretary of State for the Home Department whether he will make a statement about his investigation into the use of dogs in experiments to develop new smoking materials.

Dr. Summerskill: I am not yet in a position to make a statement. My inquiries are continuing.

Mr. Walker: Does the hon. Lady appreciate that that reply will not satisfy many in this House and in the country? About 150 hon. Members of all parties have signed a motion about this, and I have been petitioned by hundreds of people. Many of us are disgusted by these tests, and we ask the Home Office to take urgent action straight away.

Dr. Summerskill: I recognise that there is strong feeling in the House and the country that these experiments are cruel and unnecessary. At the same time, I am aware of the view that as long as people are permitted legally to smoke, doctors, scientists and the Government have a duty to protect them as far as possible from harmful effects, even if those harmful effects are self-inflicted. This view is held by many people, and therefore all these aspects of the problem must be considered.

Sir J. Eden: Meanwhile, will the hon. Lady immediately set in hand a review of the guidelines to be followed when licensing live animals for research? Will she also urge upon the Secretary of State for Education that he should give active encouragement to the Medical Research Council to give greater priority to research into alternatives to the use of live animals for this type of work?

Dr. Summerskill: Research into the development of alternatives to animals is, as has been said, a matter for my right hon. Friend. I am making inquiries with great urgency. They involve, as well as the Home Office, the responsibilities of other Departments, including especially the Department of Health and Social Security and the Department of Education and Science.

Mr. Michael Stewart: Granted that there may be a case for research to make smoking more safe, is that duty so absolute


that it should be pursued by means of research involving cruelty to live animals?

Dr. Summerskill: That is an aspect of the problem which I am bearing in mind. I shall be making a statement as soon as possible, and I shall be writing separately to all those who have written to me.

Mr. Beith: Is the hon. Lady aware that many of us believe that the only basis upon which experiments on living animals can be accepted is that it is the only way of relieving suffering and of avoiding death? Does she recognise that in this case those principles do not apply?

Dr. Summerskill: Every experiment on every animal has to be considered independently for the purpose which it is being carried out. That is what is being done in this case.

Mr. Molloy: In view of my hon. Friend's replies, is there not a possibility that she may have to concur with the view that those who carry out these experiments on dogs may wish to submit themselves to being bitten by dogs, in the interests of trying to find the cause of rabies?

Dr. Summerskill: My hon. Friend's remarks illustrate the wide ramifications of this subject.

Mr. Burden: Does the hon. Lady agree that the Act which covers experimentation on animals is 100 years old, that there were then about 366 experiments, whereas there are now 5 million every year, and that there are 16,000 people carrying out experiments but only 14 inspectors? Despite the hon. Lady's remarks in her penultimate reply, surely it is quite impossible, in view of the number of experiments being undertaken, to make sure that they help to save or to prolong human life and ease suffering? The whole situation needs examining in the light of today's circumstances.

Dr. Summerskill: As the hon. Gentleman pointed out, the Cruelty to Animals Act is 100 years old. But the Littlewood Committee sat with the specific object of investigating the whole subject of experiments on animals, and that committee reported in 1965.

Immigration (Indian Subcontinent)

Mr. Lane: asked the Secretary of State for the Home Department what conclusions he has now reached about procedures for scrutinising immigration applications from dependants, in the light of the Minister of State's recent visit to the Indian subcontinent.

Mr. Alexander W. Lyon: I gave an indication of various measures that are under consideration during the debate on the Consolidated Fund Bill on 23rd January, but it will be some little time before we can complete our examination of these and other possibilities.

Mr. Lane: How does the hon. Gentleman reconcile what he said in that debate—that no conclusions had been reached—with Press reports that a less strict system is already in operation on the subcontinent? In view of the recent increase in the quota of vouchers for United Kingdom passport holders, will he assure us that the Government will make no changes which result in a significant increase in the flow of immigrants from the subcontinent?

Mr. Lyon: I cannot give that assurance. The object of the tour and the review of procedures was to see whether we could get away from the enormous suffering which is caused to individuals by the delays in the present procedure for getting entry certificates in the subcontinent. It is my hope that the rate will increase. What I said on 23rd January still obtains. But if the rate increases, that does not mean that the total number coming to this country will be any greater. Only a finite number have the right to come. They will simply come a little more quickly.

Mr. Biggs-Davison: Is the hon. Gentleman aware that the reported attitude which he took up on his tour fed the fears of a number of people in this country, which is very bad for harmony between the races? Is he aware also that to remove such fears it would be desirable to give some indication when the flow of dependants is likely to cease, and about how many, in all, there are likely to be?

Mr. Lyon: I do not think that anything that I said increased fear. I made it plain right at the beginning of the tour that we were concerned with a finite number of women and children of people already settled here, to whom the British Government gave the right to come to this country. We were concerned about the rate at which they were coming, which was so slow that it was causing too much distress. When they come, this pool of immigration will have dried up completely, and I expect that that will happen within a very few years.

Mr. Rose: Does my hon. Friend agree that it is socially undesirable for immigrant males to be in this country without their families and dependants? Does he also agree that it would increase harmony and good race relations if they were allowed to have their dependants and wives and children with them in a normal family life?

Mr. Lyon: It is always inhuman for any man to be separated from his family only by the rigours of bureaucracy and not for any reasons which the family itself has deemed to be essential.

Prisoners (Long-Term Sentences)

Mr. Grocott: asked the Secretary of State for the Home Department if he will prepare schemes for rehabilitation for the increasing proportion of prisoners serving long-term sentences.

Dr. Summerskill: Special attention is being given to improving opportunities for long-term prisoners to rehabilitate themselves.

Mr. Grocott: Does my hon. Friend agree that the problem of the long-term prisoner is an increasing one and a serious one? Does he agree with the Howard League and others that there is an urgent need for research into the effects that long sentences have on prisoners? Further, does he agree that any proper rehabilitation scheme must include a greater commitment of resources towards the training of prison staff for both pre-service and in-service training?

Dr. Summerskill: Yes. Efforts are being made on the lines that my hon. Friend has indicated. In particular, individual

plans for each prisoner are being drawn up. A programme covering work, education, welfare and preparation for realease is being drawn up for each of them.

Mr. Rees-Davies: What evidence has the Minister that there is an increase in retraining for industry, so that the men who are coming out from long-term sentences have some opportunity of getting into industry? Is that being done prison by prison?

Dr. Summerskill: The scope of vocational training is being widened so that the type of work available is far greater. There is also the pre-release employment scheme, under which, before release, selected prisoners go out daily to work in the community at normal rates of pay.

Voluntary Services Unit (Grants)

Mr. Steen: asked the Secretary of State for the Home Department if he will take steps to maintain the purchasing power of grants, in the light of current inflationary trends, which his Department makes to hybrid voluntary organisations through the Voluntary Services Unit.

Mr. Alexander W. Lyon: In general, grants made by the Voluntary Services Unit are adjusted for inflation where the grant represents a substantial proportion of the organisation's total income.

Mr. Steen: Will the Minister issue a circular to local authorities echoing those sentiments and telling them that when they are searching for cuts they should not cut the grants of voluntary organisations first?

Mr. Lyon: I am afraid that that aspect is outside the control of my Department. The hon. Gentleman should address his remarks to another Minister. The Voluntary Services Unit makes grants direct to the organisations and not through the local authorities.

Prison Rules

Mr. Watkinson: asked the Secretary of State for the Home Department if he will now consider amending Rule 34(8) of the Prison Rules 1964.

Mr. Gould: asked the Secretary of State for the Home Department whether he will seek to change Rule 34(8) of the


Prison Rules 1964 which defines a prisoner's right of access to legal and other advice.

Mr. Roy Jenkins: I shall give effect to the court's ruling in the Golder case, and I am actively studying the means by which this should be done.

Mr. Watkinson: I thank my right hon. Friend for that reply. Does he accept that Rule 34(8) severely restricts the rights of prisoners to communicate with persons, including solicitors, outside prison? Does he acknowledge that as a result of the decision that he mentioned we are in breach of two articles of the Convention on Human Rights?

Mr. Jenkins: I note the decision of the court on three matters, which does not conflict with what my hon. Friend said. I should like to consider a little further exactly what this involves in relation to Rule 34(8). I assure my hon. Friend and the House, as I said in my first answer, that effect will be given to the court's decision.

Mr. Gould: Does my right hon. Friend accept that the reasoning behind the court's decision that the right of access to a solicitor is an essential element in a fair trial applies equally to arrested persons as to prisoners? Will he consider the position of arrested persons in the light of the court's decision, bearing in mind that many of them find, because the Judges' Rules lack statutory force and are widely ignored in practice, that their right of access to a solicitor is illusory?

Mr. Jenkins: I shall consider carefully what my hon. Friend says, although I do not think that it arises directly out of the court's decision.

Mrs. Millie Miller: When my right hon. Friend is considering this rule will he also consider Rule 43, under which it is possible for prisoners to be in their cells for 23 hours of the day because there is said to be insufficient staff to supervise them in any form of work or recreation?

Mr. Jenkins: Rule 43 does not arise out of the Golder case or the judgment, as I am sure my hon. Friend knows. No shortage of staff makes it necessary for people to come under Rule 43. Despite

those considerations, I shall consider carefully what my hon. Friend has said.

Oral Answers to Questions — WEMBLEY

Mr. Sillars: asked the Prime Minister if he will pay an official visit to Wembley.

The Prime Minister (Mr. Harold Wilson): I hope that it will be possible to visit Wembley for the Rugby League Cup Final in May, Sir.

Mr. Sillars: Is my right hon. Friend aware that there is another very important engagement at Wembley, on 24th May, when thousands of Scots will descend on that stadium to witness the superior skills of Scottish football?

Hon. Members: Rubbish.

Mr. Sillars: I must confess that England has the disconcerting habit of scoring more goals than us and being technically declared the winners. None the less, is my right hon. Friend aware that many thousands of Scots who are steel producers and steel users will be very happy this afternoon if he will confirm the reported commitment that he made on behalf of the Government to the Scottish TUC that the Government will now insist that the British Steel Corporation commences planning for a major development at Hunterston, that construction will start well before 1982, and that we shall come on stream shortly after 1982?

The Prime Minister: My hon. Friend should not be so humble about the achievements of the Scots at Wembley. Most times I have been there the Scots have won. I was aware of the match, and I hope that I shall be able to get a ticket, although there is some threat of a conflicting engagement. I am certain that the minds of the Scots will be not exclusively on steel but also on football. As regards what I said in Scotland, I stand by the exact words that I used in the statement that I made at the Press conference and on radio and television.

Mr. Baker: If the Prime Minister visits Wembley he will have to go through my constituency. Will he allay the real concern that my constituents feel—many of them are Jewish—about Mr. Shelepin's impending visit to this country? Will he give an undertaking that neither he nor


any of his Ministers will welcome Mr. Shelepin, who is the former head of an organisation in Russia which systematically tortures and has murdered many of its victims?

The Prime Minister: I do not think that this arises out of my hon. Friend's Question. Many routes to Wembley do not involve going through the hon. Gentleman's constituency. I am aware of the strong feelings on these matters. If the visit continues to be in prospect these are matters for my right hon. Friend the Secretary of State for the Home Department.

Oral Answers to Questions — BINBROOK

Mr. Brotherton: asked the Prime Minister if he will pay an official visit to Binbrook.

The Prime Minister: I have at present no plans to do so, Sir.

Mr. Brotherton: Is the right hon. Gentleman aware that Binbrook lies in the heart of North Lincolnshire farmland? Is he further aware that on 17th February his right hon. Friend the Minister of Agriculture, Fisheries and Food made a most important statement in the House and expressed the view that the House would be able to debate agriculture in the near future? Will the Prime Minister instruct his right hon. Friend the Leader of the House to do his duty, for once, and give the House a chance to debate the vital matter of agriculture?

The Prime Minister: I have no doubt that the hon. Gentleman's constituents will appreciate what my right hon. Friend has done in Brussels by altering the whole basis of the common agricultural policy which the previous Government so tamely accepted.
The question of a debate on this subject is for my right hon. Friend the Leader of the House, who is aware, as I am—but as the hon. Gentleman may not be—that over the last 20 years on nearly every occasion debates on agriculture have been held on Supply Days. That is a matter about which the hon. Gentleman might talk to his right hon. Friends.

Mr. Ford: If my right hon. Friend is unable to visit Binbrook, will he, the next time that he is in Bradford on one

of his routine visits, come to my constituency and explain why Her Majesty's loyal Opposition are unconstructive, impotent and manifestly failing in their constitutional task?

The Prime Minister: That is not a matter to be discussed only in Bradford. I think one could press it more widely. Seriously, we are a party of compassion. I have long observed that little local difficulties are not the monopoly of any of our great parties—but the best of British!

Oral Answers to Questions — WORLD FOOD CONFERENCE

Mr. Farr: asked the Prime Minister if he is satisfied with the co-ordination between the Ministry of Agriculture, Fisheries and Food and the Ministry of Overseas Development in relation to implementing the World Food Conference pledges.

The Prime Minister: I would refer the hon. Member to the reply which I gave to my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) on 16th January.—[Vol. 884, c. 147.]

Mr. Farr: I thank the right hon. Gentleman for that reply. Will he look at the whole attitude of the Minister of Agricuture, Fisheries and Food more closely, because many people feel not only that he is failing in his duty regarding this co-ordination, but that, in other respects, he is failing the House and his party? That fact was illustrated last night, because, when we debated some of the most critical agricultural amendments to the Finance Bill and the application of capital transfer tax to that great industry, the right hon. Gentleman was not present at any time. Will the Prime Minister ask his right hon. Friend to pull his socks up?

The Prime Minister: My right hon. Friend's colleagues in the Ministry of Agriculture were present. My impression was that when the House debated these matters there were some rather notable and distinguished absentees when the votes were taken.
The hon. Gentleman's question effects a number of Ministers. I know that, in view of his interest in the World Food Council project, he will be glad to know that my right hon. Friend the Minister of Overseas Development is this week


chairing a meeting of Ministers from the whole of the Commonwealth on food production and rural development. Following the Rome Conference my right hon. Friend took the initiative in calling for a Commonwealth Conference to see what could be done.

Mr. Hooley: Will my right hon. Friend confirm that it would probably be more appropriate for the Minister of Overseas Development than the Minister of Agriculture, Fisheries and Food to represent this country on the World Food Council, since it is largely concerned with the food problems of developing countries?

The Prime Minister: I entirely agree with my hon. Friend. I referred to my right hon. Friend because of the question which had been put. My hon. Friend will be aware that in Washington my right hon. Friend and I took the initiative with President Ford. We have pursued it since and intend to make it a major item, if we can, at the Commonwealth Conference, with the proposals that I then put forward and set out in a speech in Leeds about the world food programme to avoid cartelistic devices to restrict production, in order to give assurance to producers for a long time ahead, whatever the state of the market, and, in particular, to cover not merely food production but fertilisers and other things, some of which are in danger of falling into international cartels' hands.

Mr. Evelyn King: Does the Prime Minister accept that whatever social or financial effects the Finance Bill may have, it must reduce the injection of private capital into agriculture and that no public substitute has been proposed? Therefore, is not the inevitable and logical result of the Bill that less food will be produced at higher cost?

The Prime Minister: I do not accept what the hon. Gentleman said. The House is having more than adequate time this week to discuss all these matters on the Finance Bill, and the hon. Gentleman will no doubt have tried to make his point.

Mr. Guy Barnett: Is my right hon. Friend aware of the enormous support, on both sides of the House, for the initiative taken by the Minister of Overseas

Development and for her part in convening the Commonwealth Food Conference? Therefore, does he not think it deplorable that only one British national newspaper gave even a line of mention to this vital conference?

The Prime Minister: It is not for me to comment on the situation. We know that newsprint is scarce and expensive. I suppose that is why so much is wasted on other things. Now that it has been mentioned in this House, I have no doubt that it will be on the front page of every newspaper. I hope that the Press will record that this is a positive achievement in Commonwealth co-operation, in fulfilment of a world idea.

Oral Answers to Questions — BANNOCKBURN

Mr. Canavan: asked the Prime Minister whether he will pay an official visit to Bannockburn.

The Prime Minister: I have at present no plans to do so, Sir.

Mr. Canavan: Will my right hon. Friend try to arrange a visit to Bannockburn, the centre of Scottish patriotism? Will he also accompany me on a visit to the Bannockburn Miners' Welfare Club and the 1314 Inn, where I can introduce him to some true Scottish patriots who prefer Socialism to separatism? In order to demonstrate conclusively that the people of Bannockburn reflect accurately the views of all Scottish people, will my right hon. Friend seriously consider holding a referendum on the whole question of devolution so as to prove, once and for all, that the people of Scotland want Socialist devolution rather than the silly separatist policies of the Scottish National Party?

The Prime Minister: I am grateful to my hon. Friend for his invitation. I am not sure that it is necessary for me to visit Bannockburn to that end. Certainly, in my discussions in Scotland last week with the STUC and others I found general agreement that the solution of Scotland's economic problems lies in the context of membership of the United Kingdom. I am not in favour of a referendum on this question. I believe that the majority of Scottish people firmly wish to eschew separatism. At a suitable


moment I should like to take up my hon. Friend's invitation to go to the club in Bannockburn that he mentioned.

Mr. Donald Stewart: In view of the earlier meeting between the Scots and the English at Bannockburn, at which certain satisfactory conclusions were reached, may I ask whether the right hon. Gentleman accepts that both his view and the view of the Lord President of the Council is much more realistic than the views of some of his backwoodsmen from Scottish constituencies, especially one with a majority of 367?

The Prime Minister: If the size of majorities were a qualification for expressing views in this House there would be some rather odd silences, including some from the Scottish National Party.
I do not think that one needs to go to Bannockburn to discuss these matters. Those were the days when there was certain evidence of divisiveness, I am too gentlemanly to refer to the Battle of Pinkie, in 1547, and what happened. They all had different conclusions. Surely we are all now working together, and no one, apart from the small minority represented by the hon. Gentleman, supports separatism.

Mr. Whitelaw: The Prime Minister referred again to the important discussions that he had with the Scottish TUC, to which the Leader of the House referred last Monday. Do not these discussions and the documents that came forward make it all the more important that the House should be informed about them in a White Paper long before we consider any question of legislation on the subject?

The Prime Minister: The discussions were important. I shall certainly consider how these matters can be made available to the House. These documents were, in fact, published. They were very forward-looking and to a high degree represented the views expressed on both sides of the House. It is not necessary to have a White Paper, because in the debate my right hon. Friend explained the position as the Government see it.

Oral Answers to Questions — MALTA

Mr. William Hamilton: asked the Prime Minister if he will pay an official visit to Malta.

Mr. Skinner: asked the Prime Minister whether he will pay an official visit to Malta.

The Prime Minister: I have at present no plans to do so, Sir.

Mr. Hamilton: Will my right hon. Friend make plans? Does he not realise that a massive amount of British taxpayers' money has been spent on building a hospital on a neighbouring island by people who are under police investigation at the moment? Is it not highly undesirable that in a situation like that certain of those people should occupy quite prominent positions in this House? Will my right hon. Friend undertake that if local councillors are to be surcharged for alleged misbehaviour at local level, Ministers should be surcharged for misappropriation or abuse of public money in other spheres?

The Prime Minister: No, Sir. I think that in that question my hon. Friend fell below his usual high standard. He will be aware that there is no ministerial responsibility whatever for this matter. Malta is a self-governing Government.
With regard to what I suspect—I hope I am wrong—my hon. Friend was trying to imply, he must realise that the matter is subject to legal proceedings and that it would be inappropriate to comment on his question.

Mr. Skinner: But is it not a fact that the Director of Public Prosecutions has asked the Fraud Squad to cease its inquiries into the possible misuse of £1·6 million in building the hospital at Gozo? Is not that action quite remarkable, in view of the statement made by the Attorney-General on 9th November 1974 when the question which he put to himself and his audience at Oxford was whether one can go on grinding at the list of 300 names? Why is it that some people in those cases can get away with it, and yet two people on the Shrewsbury picket line and the Clay Cross 11 were made subject to a different kind of law?

The Prime Minister: I think that in the latter part of his supplementary question my hon. Friend has got a long way from Malta. I have no knowledge whatsoever of the circumstances about which he purports to know in relation to a police or any other inquiry. In view of the high regard in which my hon. Friend is held in the House—[Interruption.]—at any rate on the Government side of the House; I cannot comment on the tastes of Conservative Members—I hope he will redirect his undoubted talents and energies to those very many subjects on which he speaks with great authority, and leave this one alone.

LONDON DOCKS (DISPUTE)

Mr. Madel: (by Private Notice) asked the Secretary of State for Employment if he will make a statement on the dispute in the London Docks.

The Secretary of State for Employment (Mr. Michael Foot): On 28th February some 9,000 London dockers stopped work. The stoppage is unofficial and followed unofficial action both by dock workers and road haulage workers.
The dispute originated with the picketing of the Dagenham Storage Company at Barking and F. J. Robertson at Millwall with the objective of securing employment there for registered dockers. Additionally, dockers began to refuse to handle vehicles which it was alleged served these and other establishments where it was claimed cargo handling work should be undertaken by dock workers. This action led to counter-picketing by road haulage workers, who endeavoured to prevent goods from reaching the docks.
At the request of the Transport and General Workers' Union and with the agreement of all the other parties, the Advisory, Conciliation and Arbitration Service established an independent inquiry on 24th February into the issues at Barking and Millwall, and this inquiry is now proceeding.
The workers concerned are in the main members of the Transport and General Workers' Union, and the union has consistently urged that all industrial action in this dispute should cease. On 27th February the haulage workers accepted the advice of the union and removed their

pickets. Dockers at Tilbury, however, continued to refuse to handle some vehicles, and this led to the stoppage. The union's national executive has this week urged a return to normal working, and its general secretary met all the London dock port stewards last night in an endeavour to persuade them to accept the executive's decision.
The issues involved are of long standing. They were largely responsible for the national dock strike in 1972 and have been a potent source of industrial unrest for many years. During this period there has been a substantial reduction in the employment opportunities available for registered dock workers, while at the same time changes in the ways goods moving to and from ships are handled has led to work traditional to the docks and to dock workers moving from them. Under existing legislation it has not been possible to extend the coverage of the Dock Labour Scheme to all such activities where this might be judged appropriate.
On 15th July 1974 I told the House that I proposed to begin consultations on the extension of the scheme to non-scheme ports and on possible changes in the statutory definitions which define the scope of the scheme. These consultations led me to conclude that significant changes are necessary to reflect the changes which have taken place in the industry and to ensure that satisfactory arrangements are established to deal with possible future changes. In the Queen's Speech the Government undertook to publish proposals for ensuring further safeguards for employment in the docks. I hope to publish proposals for legislation very shortly.
As the Government are shortly to begin consultations on these proposals and an independent inquiry is currently considering the particular problems at Barking and Millwall, I hope that the dockers will respond to the advice of the Transport and General Workers' Union so that normal working can be resumed and progress quickly made in establishing new arrangements to deal with the vexed problems. Any stoppage in the docks can only increase our economic difficulties and, indeed, threaten the number of jobs they provide.

Mr. Madel: Can the right hon. Gentleman say whether those directly involved


in and affected by the dispute have submitted evidence to the Advisory, Conciliation and Arbitration Service inquiry? Can he say when this inquiry will be completed, and whether it is his intention to extend the Dock Labour Scheme by legislation to be brought in during this parliamentary Session? Will the right hon. Gentleman and the T and GWU executive consider reminding those on strike that if the dispute drags on, other people's jobs will be at risk and the country's economy will be seriously affected?

Mr. Foot: I cannot say when the Advisory, Conciliation and Arbitration Service will complete its inquiry, but those concerned appreciate the need for speed, as do the different parties who are giving evidence—and evidence is being given to the inquiry. We hope that it will be able to report as soon as possible.
It is the Government's intention to introduce in this Session the legislation required to extend the scheme. How long this Session will be is another matter, but certainly we wish to proceed with the legislation as speedily as possible. I hope that very soon we shall publish the consultative document about the legislation so that people can see clearly what we propose and the parties concerned can make any representations they want.
I have already indicated my view, and the Government's strongly held view, about the whole dispute. We believe that it should be brought to an end at once. We believe that people should resume work at once. We believe that this is urgent in the interests of the dock workers themselves.

Mr. Prescott: My right hon. Friend referred to another inquiry into this industry. Does he realise that it has been subject to a number of inquiries, under both Governments, which have come out with recommendations which the dockers have accepted but which have not been implemented, though the Labour Government have now said they will implement them? Is it not time to step in and take action in view of the fact that yet again the docks industry is being threatened by private employers? First it was the stevedores, and now it is the lorry driving companies which are disrupting this important industry.

Mr. Foot: I appreciate what my hon. Friend has said. I was informed by some of the docks representatives whom I met yesterday at the meeting of the T and GWU executive that they had already had 17 investigations into the docks, and therefore another one would be the eighteenth. We are not proposing another investigation. We are proposing a consultative document to be put before the House as a preparation for legislation and for action on the basis of that legislation. We are not proposing another inquiry. We are proposing action to deal with the matter.

Mr. Prior: As with some other things, these are delicate matters. This is a dispute involving two branches of the same union, and it is a delicate matter for the union and also for the country. However, will the right hon. Gentleman accept that the Opposition do not believe that the remedies proposed by him this afternoon or by the Government are any long-term answer to the problems facing the docks and will merely add to costs and restrict our trade even more than at present? In a situation where jobs are at risk in this way one does not, in the long term, preserve them by this sort of action. Will the right hon. Gentleman remember that when he comes to discuss further the Dock Labour Scheme? In the meantime, we join him in urging a return to work, otherwise more jobs will be lost.

Mr. Foot: We are glad to see the right hon. Gentleman recovered so speedily from his unofficial absence—although many might wish that he would extend it. I cannot accept what he says about our proposals. I do not think that he should condemn them before he has seen them. I have the advantage that I know what they are. I hope that when he sees them he will bring his usual, or shall I say his unusual, objective view to bear upon the matter. Then we shall be able to discuss the matter in the House, which is the proper place to settle legislation on this issue.

Mr. Roy Hughes: Does my right hon. Friend appreciate that dock workers are still a vital section of the industrial labour force and that they are getting fed up with all the reports and consultative documents and so on? Does he accept that what they require is action now?

Mr. Foot: The most effective action which we believe can be taken to deal with this question must be through legislation. It cannot be done by edict. It has to be done by legislation approved by this House. The dock workers would be wise, in their own interests, to call off this action immediately, to examine the proposals we are making carefully, and to make any representations that they wish, together with other parties, about those proposals. That is the proper way to proceed in the interests of the dock workers and of the country.

Sir D. Walker-Smith: As the Advisory, Conciliation and Arbitration Service is constructively engaged in this dispute, may I ask the right hon. Gentleman to be encouraged by that into giving further consideration to the possibility of the service being usefully engaged in the signalmen's dispute, which is bringing continuing inconvenience to many commuters?

Mr. Foot: I have already given the reasons why the Government do not believe it is wise to intervene or for the parties in this signalmen's dispute to go to the Advisory, Conciliation and Arbitration Service. What has happened has confirmed the wisdom of what I then said. If all hon. Members in all sections of the House would back the Government in this, the prospect of bringing the signalmen's dispute to an early end would be much enhanced.

Mr. Loyden: Would my right hon. Friend agree that the present dispute in the docks is the culmination of the concern and fears of many dock workers? Is he aware that in London the number of dock workers has been reduced from 22,000 to 9,000 and on Merseyside from 16,000 to 8,000 with no indication that the numbers will ever be made good? Does he further appreciate that this causes real concern? Is he aware that the sooner we have the consultative documents and legislation the sooner will there be confidence about employment prospects among dock workers?

Mr. Foot: My hon. Friend has certainly shown what are the anxieties and fears of many dock workers. We are seeking to learn from these and to produce proposals which will assist in allaying these anxieties. If this action continues it can only add to the difficulties,

The dockers have an interest in this but there are other parties concerned, too. That has to be taken into account in the legislation we produce.

BUSINESS OF THE HOUSE

Mrs. Thatcher: May I ask the Leader of the House to state the business for next week, please?

The Lord President of the Council and Leader of the House of Commons (Mr. Edward Short): Yes, Sir. The business for next week will be as follows:
MONDAY 10TH MARCH—Remaining stages of the Finance Bill [4th ALLOTTED DAY].
TUESDAY 11TH MARCH—Debate on the White Paper on the Referendum on United Kingdom Membership of the European Community, Command No. 5925, when the rule will be suspended for two hours.
Consideration of the Criminal Procedure (Scotland) Bill [Lords,] and Supply Powers Bill [Lords,] and the Statute Law (Repeals) Bill [Lords,] which are consolidation measures.
WEDNESDAY 12TH MARCH—Remaining stages of the Prices Bill.
Consideration of Lords amendments to the Social Security Benefits Bill.
Remaining stages of the Export Guarantees Amendment Bill.
Motion on the Calf Subsidies (United Kingdom) (Variation) Scheme.
Motion on the EEC Document on the European Monetary Co-operation Fund (R/3594/74).
THURSDAY 13TH MARCH—Supply [12TH ALLOTTED DAY]: The Question will be put on all outstanding Supplementary Estimates.
There will be a debate on Small Businesses and the Self-Employed, on a motion for the Adjournment of the House.
At seven o'clock the Chairman of Ways and Means has named Opposed Private Business for consideration.
Motions on Northern Ireland Orders on appropriation, selective employment premium and community relations.
FRIDAY 14TH MARCH—Private Members' motions.
MONDAY 17TH MARCH—Proceedings on the Consolidated Fund (No. 3) Bill.
The House will wish to know that, subject to progress of business, it is hoped to propose that the House should rise for the Easter Adjournment on Thursday 27th March until Monday 7th April.

Mrs. Thatcher: Can the right hon. Gentleman say what the motion will be for the referendum debate and, in the event of a referendum being held, whether he intends to enable hon. Members to take part in the campaign by having a short recess in the final stages? Second, if he cannot tell us the date of the Budget, can he say whether there will be a debate on public expenditure or the economy before the House rises for Easter.

Mr. Short: I am proposing that the referendum debate should arise on the motion for the Adjournment of the House. I am open to the views of hon. Members about whether there should be a short recess for the referendum period. I would like to hear hon. Members' views on that, although I have no doubt what their views will be. As I said last week, the Budget will be after Easter. I have certainly promised a debate on public expenditure at some time. I cannot say when it is likely to be.

Mr. James Lamond: While we can all appreciate the extreme pressure upon the time of the House, may I ask my right hon. Friend whether he will be able to find time for an urgent debate on the textile industry because the crisis within that industry is growing daily? If he cannot find the time, can he make overtures to the Conservative Party and suggest that it uses one of its Supply Days to discuss this important matter? Secondly, will he ask his right hon. Friends to take some action within the EEC regulations which permit corrective action to be taken to deal with excessive imports of textiles?

Mr. Short: I will certainly pass my hon. Friend's final comments on to my right hon. Friends concerned. I have told them of other points raised over the past few weeks, and the Prime Minister answered a Question on this subject a few days ago. I cannot give any time for

this subject before Easter. I have just announced the Consolidated Fund Bill debate for Monday week. That will be an appropriate occasion for a short debate on this matter.

Mr. Grimond: Is the right hon. Gentleman aware that there is considerable anxiety in Scotland over the future control of Scottish industry? Will the right hon. Gentleman ask the Minister concerned to make a statement about the relationship between the National Enterprise Board and the Scottish Development Agency?

Mr. Short: I will pass that on to my right hon. Friend. I imagine that there will be opportunities to debate it when the Bill comes before the House in the near future.

Sir G. de Freitas: Does my hon. Friend recall that last Thursday, when I asked him when we could have a debate on the decision of the European Commission to support our negotiating proposal for a regional aid policy he replied "I hope before long"? Has he anything to add to that?

Mr. Short: Not next week, Sir. I hope that it will be possible to arrange a debate on this subject before Easter.

Mr. Silvester: Is the right hon. Gentleman aware of the critical situation which has arisen at Christie Hospital in Manchester which is reported in the Daily Telegraph today? Is he further aware that this has become increasingly urgent because of the desire of NUPE to decide which cases should be admitted to this premier cancer hospital is causing outrage? Is he aware that last Saturday two cases for investigation of malignant cancer were refused admittance and were admitted only through the assistance of the nursing staff? Will he find time for a debate on this matter?

Mr. Short: I cannot find time to debate it but I will certainly pass it on to my right hon. Friend the Secretary of State for Social Services. The debate on Monday week would be an appropriate occasion to raise this subject.

Mr. Jay: Can my right hon. Friend assure us that the debate on public expenditure will at least come before the Budget and that in it hon. Members will


be able to cover economic policy and the social contract?

Mr. Short: It will be a debate on the White Paper, but I shall certainly bear in mind what my right hon. Friend has said.

Mr. Molyneaux: Can the right hon. Gentleman say when we might have the sitting of the Northern Ireland Grand Committee, for which we asked as far back as 13th February, to discuss the IRA cease-fire and the consequential arrangements? Is there any valid reason for delay now that the Secretary of State for Northern Ireland has said that he has no objections?

Mr. Short: I know of no reason for delay, but I will certainly look into the matter and communicate with the hon. Gentleman and his hon. Friends.

Mr. Faulds: After these months of failed promises and delay, what are the prospects for public lending rights legislation?

Mr. Short: That Bill will be introduced in the very near future. There is a great pressure on the parliamentary programme, but I will do my best to have it brought in as quickly as possible.

Mrs. Knight: Is the right hon. Gentleman not aware of the extremely serious situation which has arisen throughout the whole of the National Health Service? Does he not know that, because of the intransigence of the Secretary of State for Social Services, there is now a complete breakdown in negotiations between herself and the surgeons? Would he accept that, however experienced a hospital porter is with a trolley, he cannot make diagnoses or assessment decisions on patients? Will the right hon. Gentleman not understand that both the present and the future of the NHS are now at stake and permit a proper debate—not one on the Consolidated Fund Bill—on this vital matter?

Mr. Short: Intransigence is not confined to one quarter, I am afraid. It is found in many quarters in this matter, but it does not help in this dispute to overstate the case, as, with respect, the hon. Lady did. I shall certainly hear her points in mind and pass them on to

my right hon. Friend, but this would be an appropriate subject for a Supply Day.

Mr. Michael McGuire: When can we expect a debate on the strategic plan for the North-West—a debate which is long overdue. If we could have a debate on that, it could be tied in with a debate on the position of the textile industry, which has reached crisis proportions. Hon. Members on these benches will soon be taking action.

Mr. Short: I promised the House two or three weeks ago that I would bring forward a proposal for debating regional matters. I hope to do that in the near future. It will be a novel proposal, but I hope that it will satisfy the demands made from both sides of the House for regional debates. I realise that this is an important and valid demand.

Miss Fookes: When can the House expect to debate the Bullock Report on the use of English? This is a matter to which we on this side attach the greatest importance.

Mr. Short: We also attach a great deal of importance to that report, which most of us think is excellent, but I cannot give any time in the near future. It is rather early yet. It is a long report, and I am sure that many hon. Members have not yet got to the end of it.

Mr. Newens: My right hon. Friend has previously promised a debate on foreign affairs before Easter. Can he reiterate that promise today? What opportunity will be given for hon. Members to debate the affairs of the rest of the world, apart from Europe? There are important questions for discussion of which this House ought to be able to set aside time?

Mr. Short: There is a real need for this. I promised, and I reaffirm, that there will be a wide-ranging debate on foreign affairs before Easter.

Mr. Henderson: Is the right hon. Gentleman aware that there has not been a debate on the Scottish economy since his party came into office? He will recall that it was his intention to hold one in the autumn. No doubt he would agree, since seeing the Scottish TUC, on the urgency of this matter. Does he not agree


that, in view of the rise in unemployment and short-time working in Scotland, it is highly desirable to have such a debate as soon as possible?

Mr. Short: This would be an appropriate subject to be debated in the Scottish Grand Committee, of course.

Mr. Dalyell: In the interests of all shades of opinion, not least his own, would my right hon. Friend not agree that there is an overwhelming case for a detailed and coherent White Paper on devolution? What is the trouble in announcing when it will be?

Mr. Short: I have explained to my hon. Friend on many occasions, over and over again, that I will certainly look at this. If the preparation of a White Paper would not unduly delay preparation of the devolution Bill, I would certainly consider producing one.

Mr. Wells: When there is a debate on regional matters, may we be assured that it will include the region of Kent? We have less expenditure on our hospitals, less expenditure on our Channel Tunnel, less expenditure on our schools and less help for our agriculture and our special industry of horticulture than any other region.

Mr. Short: Certainly the proposal that I hope to bring before the House will enable all the English regions to debate their affairs. We are at a disadvantage compared with Scotland and Wales, which have Grand Committees. I hope that we can overcome that.

Mr. Greville Janner: Will my right hon. Friend set aside time for a debate on the situation at the Imperial Typewriter Company in the cities of Leicester and Hull, and particularly on the disgraceful refusal of Litton Industries even to pay the redundant men the money—the pay, the wages, the holiday pay—that they have earned so far?

Mr. Short: I am afraid that I cannot promise any time before Easter, but certainly a debate on the Consolidated Fund Bill would be appropriate for this. If notice were given, a Minister would be present to reply.

Mr. Winterton: Would the right hon. Gentleman further consider the plea of

the hon. Member for Oldham, East (Mr. Lamond)? The crisis facing the textile industry is severe. He found time, exceptionally, for a debate on Norton Villiers Triumph, where just a few thousand jobs were at stake. Would he not find time before Easter—Government time—to debate the textile industry, in which tens of thousands of jobs are at stake?

Mr. Short: No, Sir, I cannot find time for a full debate on this matter before Easter. I do not underestimate the position. I have said several times that I realise its importance. On every occasion when these matters have been raised from either side of the House, I have referred them to my two right hon. Friends.

Mr. English: Is my right hon. Friend as aware as I think he is of the concern expressed to me and to him about the length of time that the Boyle Committee is taking to report? It may be that we do not want it at the same time as the Budget, but can he assure us that it will come before some later date in the year?

Mr. Short: It will certainly come before some later date in the year. It is a fundamental review of salaries, allowances and pensions, and I am afraid that Lord Boyle will take a few months longer yet on it.

Mr. Maxwell-Hyslop: Is the Leader of the House aware that horticulture and the egg production section of agriculture are both in desperate straits, that the Opposition have provided five days of their own time in the last year for discussing agricultural matters, and that in a debate on the Consolidated Fund Bill only the most junior Minister turns up to reply, not the Minister of Agriculture himself? Will he therefore allow Government time to discuss the urgent action which needs to be taken?

Mr. Short: I have taken the trouble to check on the arithmetic in the early-day motion on this matter. I have discovered that, if we consider this Sessison, not last year, so far the Opposition have given one day. The other day was in the debate on the Address, which is a Government day—

Mr. Maxwell-Hyslop: I said "in the last year".

Mr. Short: I am talking about this Session. So far the Opposition have


given one of their Supply Days and the Government have given the equivalent of three full days on agriculture, so I think that it is the turn of the Opposition.

Mr. Noble: Will my right hon. Friend reconsider the answers he has just given to my hon. Friend the Member for Oldham, East (Mr. Lamond), my hon. Friend the Member for Ince (Mr. McGuire) and the hon. Member for Macclesfield (Mr. Winterton)? Will he bear in mind that the crisis situation in textiles is now developing and intensifying so rapidly that a debate after Easter will be too late? What we need is not simply a debate but action.

Mr. Short: Certainly I realise the importance of this matter. I understand the demand on all sides of the House for a debate upon it, but I am afraid that I cannot give a full day for it. I could, perhaps, consider giving a short time for a debate, but I certainly could not promise a full day because of the congestion of the programme. However, I shall certainly look at the matter.

Mr. Peyton: May I—rather unusually this week—congratulate the right hon. Gentleman on his acumen in perceiving that a recess during the campaign on the referendum would be wholly acceptable? We are very glad to know that he is considering it. Second, will he ensure that before we discuss in the House the Bullock Report on the use of English, he will secure its wide circulation in Whitehall? Third, may I say that I also appreciate what the right hon. Gentleman said about the possibility of a debate on the textile industry, a matter raised by my hon. Friend the Member for Macclesfield (Mr. Winterton)? This is a matter of very great urgency.

CONSOLIDATED FUND (No. 3) BILL (DEBATE)

Mr. Speaker: For the debate on Monday 17th March on the Second Reading of the Consolidated Fund (No. 3) Bill, hon. Members may hand in to my office by 9.30 on the morning of Thursday 13th March their names and the topics which they wish to raise. The ballot will be carried out as on the previous occasion. An hon. Member may hand in only his own name and one topic.
The main items included in the Consolidated Fund (No. 3) Bill will be the Civil Supplementary Estimates for the current year contained in House of Commons Papers Nos. 193 and 239, and the Defence Supplementary Estimates for the current year contained in House of Commons Papers Nos. 194 and 238.
It will be in order on the Second Reading of the Bill to raise topics falling within the ambit of the expenditure proposed in these papers. I shall put out the result of the ballot later on Thursday 13th March.

STANDING COMMITTEE B (COMPOSITION)

Mr. Farr: On a point of order, Mr. Speaker. May I raise with you, Mr. Speaker, a matter which I think should warrant the attention of the House—namely, the composition of Standing Committee B? That Standing Committee on the Lotteries Bill is due to meet for the first time on Tuesday. The composition of this Committee, which has been published this morning, bears no resemblance to the way that the voting went on Second Reading, which was 302 in favour of the Bill and 64 against. Of the 17 members of the Standing Committee, only one hon. Member voted against the Bill.
I would suggest that possibly the composition of this Committee should be referred to the Committee on Procedure to see whether it can be re-selected.

Mr. Speaker: I do not think that that would be appropriate, nor do I think that it is a point of order for me. No doubt it is a matter for the Committee of Selection to consider. The hon. Member has made an observation, but I do not think that there should be any criticism of the Committee of Selection unless it is on a substantive motion.

MR. ALAN GRIMSHAW (SELECT COMMITTEE'S REPORT)

Mr. Kelley: I raised with you yesterday, Mr. Speaker, a point of order on the question of the availability of documents to this House from Committees which were reported to the House and printed on the authority of the House and which were not available to hon. Members but apparently had been available


to other people. I understood that you would today either have written to me or given a ruling on the issue that I raised.

Mr. Speaker: I thought that the hon. Gentleman had communicated with me to say that on the whole he found no reason for complaint at all. If there has been some misunderstanding, I shall look into the matter.

Mr. Kelley: I understood that there had been some misunderstanding about the availability of information to the House arising from the report from the Select Committee on Nationalised Industries.
I found that in the Votes and Proceedings for 25th February reference is made as follows:
Sir Donald Kaberry reported from the Select Committee on Nationalised Industries, That they had agreed to a Special Report which they had directed him to make to the House, and had directed him to report certain Memoranda laid before them: And the Report was brought up and read (Second Special Report).
Report to lie upon the Table; and to be printed [No. 2371.
I then found, Mr. Speaker, that in The Guardian of 27th February there was a report of the proceedings of that Committee and its recommendations. Concerning the reference of the issues that had been before that Committee to the Committee of Privileges, that was not known to the House. It was not available to Members until yesterday morning. Therefore, I think that it is a breach of the privilege of the House that information which has been the business of the Select Committee should be made available to outside sources when it was not available to hon. Members.

Mr. Speaker: I shall certainly go into this matter again. I was under the impression that I had received not long ago a letter from the hon. Member rather withdrawing the suggestion that there had been a breach of privilege. However, I shall certainly go into the matter again as there is some misunderstanding about it.

Orders of the Day — FINANCE BILL

[3RD ALLOTTED DAY]

Not amended in the Committee and as amended in the Standing Committee, further considered.

4.8 p.m.

Mr. Speaker: I should like to say something to the House at the beginning of these debates. The Division bells are being slightly temperamental at present. They have been examined by the Post Office engineers this morning and again this afternoon. If there are any occasions when a bell does not ring, perhaps notice could be given at once. There were one or two such occasions yesterday. The Post Office engineers have done their very best to ensure that the system is efficient, but if anything should go wrong again, we should like notice of it as early as possible.

Clause 20

TRANSFERS AND CHARGEABLE TRANSFERS

The Chief Secretary to the Treasury (Mr. Joel Barnett): I beg to move Amendment No. 42, in page 16, line 23, at end insert:
'or at a price such as might be expected to have been freely negotiated at the time of the sale'.
This amendment honours an undertaking I gave in Standing Committee to reconsider provisions dealing with the transfers of unquoted shares. The effect of the provision was that a sale of unquoted shares for less than their full market value could not be exempted from charge as one made without donative intent and on arm's length conditions unless it were at a price freely negotiated at the time of the sale.
The amendment allows a sale to be excepted also if it were made instead at a price which might have been expected to be freely negotiated. This deals with the problem where in an unquoted company it is possible, as the hon. Member for Hertfordshire, South (Mr. Parkinson) appreciates and pointed out in Standing Committee, that there are problems in the case of the sale of unquoted shares. There


may be a situation in which there could be a sale at less than the full market value but still a perfectly reasonable transaction. The purpose of the amendment is to ensure that there is no problem in that respect.
I know that the Opposition have tabled Amendment No. 529, which would seek to exclude all unquoted company transactions in this respect. But I hope that the Opposition will agree that that would be to go much too wide. I think that the Government amendment would deal with the problem that was pointed out in Standing Committee.

Mr. David Howell: As the Chief Secretary says, the amendment goes some way to meet problems raised in Standing Committee. The Opposition amendment, which you, Mr. Speaker, have selected—Amendment No. 529, in Page 16, line 20, leave out from 'Act' to end of line 23 and insert:
'but notwithstanding the other provisions of this subsection, this subsection shall not apply to a sale of shares or debentures not quoted on a recognised stock exchange'.—
is one we should like to press strongly but, as we are denied the time to discuss these things properly, we cannot do so. Under protest, we would not move that amendment.

Amendment agreed to.

Mr. Joel Barnett: I beg to move Amendment No. 43, in page 16, line 27, leave out '25th' and insert 26th'.

Mr. Speaker: With this it will be convenient for the House to discuss Amendment No. 44, in page 16, line 27, leave out '25th March 1974' and insert '12th March 1975'.

Mr. Barnett: There are a large number of other amendments that are consequential upon this amendment. This arose, as hon. Members who served on the Standing Committee will recall, out of the birthday of my hon. Friend the Member for Welwyn and Hatfield (Mrs. Hayman).
We learned that it was her birthdaly on 26th March. The hon. Member for Weston-super-Mare (Mr. Wiggin) had moved an amendment to start the tax operating from 3.30 p.m. on 26th March. I suggested that, rather than have a start

ing time in the middle of a day, it might be better to start on the following day.

Mr. David Howell: As the Chief Secretary says, the amendment honours an undertaking which he gave in Standing Committee. There are serious fiscal reasons, as well as romantic reasons, for the amendment. We welcome it.
We should have liked to debate our Amendment No. 44, but we are denied the time. Therefore, under protest, we shall not move it.

Amendment agreed to.

Clause 22

TRANSFER ON DEATH

Mr. Joel Barnett: I beg to move Amendment No. 46, in page 17, line 13, at end insert:
'(2A) Where the deceased was entitled to an interest in possession in settled property and on his death the settlor's spouse became beneficially entitled to that property, then if—

(a) the settlor's spouse was at the time of the death domiciled in the United Kingdom and resident (within the meaning of the Income Tax Act) in the United Kingdom in the year of assessment in which the death occurred; and
(b) neither the settlor nor the settlor's spouse had acquired a reversionary interest in the property for a consideration in money or money's worth;

the value of the settled property shall be left out of account in determining for the purposes of this Part of this Act the value of the deceased's estate immediately before his death'.
The amendment provides exemption from the tax charged on the coming to an end of an interest in possession on death, where the property then reverts to the settlor's spouse. The amendment and its counterpart in paragraph 4 of Schedule 5—Amendment No. 172—arises from our consideration of the argument in Committee for the provision of exemption from the capital distribution charge where property reverts to the settlor from a discretionary trust.

Mr. David Howell: The amendment meets points made in the Standing Committee. We believe that it is a great improvement in the Bill. I assume that from now on the Chief Secretary will never refer to any such arrangements as


a loophole for tax avoidance and something to be legislated out of existence in future legislation.

Amendment agreed to.

Amendments made: No. 47, in page 17, line 23, leave out '26th' and insert '27th'.

No. 49, in page 17, line 26, leave out '26th' and insert '27th'.—[Mr. Joel Barnett.]

4.15 p.m.

Mr. Joel Barnett: I beg to move Amendment No. 51, in page 18, line 7, at end insert:
'(5A) Where any part of the property which would have been included as mentioned in subsection (4) above would, by virtue of section 40(2)(c) of the Finance Act 1969, have formed an estate by itelf, the tax chargeable under this section shall be the aggregate of—

(a) the tax that would have been so chargeable if that part had not been so included; and
(b) the tax (if any) that would have been so chargeable if that part only had formed the estate of the deceased and the deceased had made no previous chargeable transfers;

but in a case where (by reason of an excess over £25,000) the part referred to in paragraph (b) above would have been a fraction only of any property, the tax that would have been chargeable as mentioned in that paragraph shall be taken to be the like fraction of the tax that would have been so chargeable if the remainder of that property had also been included in the estate of the deceased'.
It may be convenient to discuss at the same time Government Amendment No. 52, which is on the same points.
The amendments honour an undertaking I gave in Committee to meet the point of amendments moved by the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). They relate to the transitional relief from aggregation under the old estate duty law for gifts of policies of insurance effected before 20th March 1968. That relief exempts the first £25,000 of policy proceeds from aggregation with the other property chargeable on the death. There is a similar relief for Northern Ireland.

Amendment agreed to.

Amendment made: No. 52, in page 18, line 21, at end insert:
'and
(c) subsection (5A) shall have effect with the substitution of a reference to section 7(2)(c) of the Finance Act (Northern Ireland)

1969 for the reference to section 40(2)(c) of the Finance Act 1969'.—[Mr. Joel Barnett.]

Clause 23

MEANING OF ESTATE

The Financial Secretary to the Treasury (Dr. John Gilbert): I beg to move Amendment No. 54 in page 18, line 35, leave out 'includes every' and insert means a'.

Mr. Speaker: With this amendment we may discuss Amendment No. 520, in page 18, line 37, at end add:
'but excludes any power in a fiduciary capacity'.

Dr. Gilbert: I am delighted to move the amendment formally, as I understand that that is agreeable to the Opposition.

Amendment agreed to.

Clause 24

EXCLUDED PROPERTY

Sir Geoffrey Howe: I beg to move Amendment No. 502, in page 19, line 12, at end insert:
'(4) A dwelling is excluded property if on the death of the person with an interest in possession of that said dwelling and which is occupied by him at the time of his death it passes to an ancestor or descendant, brother or sister, or spouse thereof who has lived with him for not less than two out of the three years preceding'.
The amendment is designed to deal, so far as we can, with the fact that the new capital transfer tax designed and introduced by this Labour Government will prove to be, in a way that estate duty never was, a tax on homes, on the family and—if I may be forgiven the phrase, despite the mocking of the Chancellor of the Exchequer yesterday—on the natural bonds of love and affection that exist within a family. The Chancellor derided that concept.
Perhaps that is not surprising. We know that in Labour's house, or at least in those parts above stairs that are reserved for members of the Labour Cabinet, there are many mansions. Labour Ministers appear to collect houses with as much enthusiasm as commissars collect dachas. But that is not the life they visualise for the ordinary people.


They have no natural sympathy with those who save, with those who own their own homes. I am sorry if the Chief Secretary feels underprivileged in having only one home when his colleagues have so many.
It is not surprising that the tax will impose a new and growing burden on exactly those thrifty and hard-working people who own their own homes. It will impose a new and growing burden on right to keep the benefits of thrift within one's family. I am not dealing with the rich minority, on the subject of whom the Chancellor loves to dwell, and of which he is such an outstanding, if undistinguished, Member. I am dealing with that half of the families of this country who live in their own homes. Many of those homes already come near to facing the lower limit of the new tax, because it starts at £15,000. The average price of a new home in the South-East of England is now estimated at about £14,250. If inflation continues at the pace we have unfortunately come to expect under this Government, that figure will soon be reached in other parts of the country.
It is true that the rate of tax payable on death is no higher than under estate duty, but that argument, which we have heard so often from the Chancellor, overlooks the extent to which it is a cumulative tax, assessed over the transactions effected during the lifetime of the taxpayer or his family. The tax burden must take account of the lifetime gifts of any other part of the estate of the original house-owner above £1,000, whether in the form of savings, chattels, cars or anything of that kind.
The tax will inevitably impose a new and growing burden on dispositions within the family. Even if it did not do that, there is a good additional social reason for seeking to encourage home owership, as the amendment would. There is a good reason for seeking to encourage disposition of homes within the families of those who have saved in order to buy them.
Moreover, there is a good reason for encouraging succession to the family home by others than just the surviving spouse, although that certainly is desirable. One acknowledges that the legislation at least has that effect, as did the provisions made by the Conservative

Government in 1972. But we want also to encourage succession to the home by, for example, a child or children living with the person who wishes to pass it on at death or at any other time. Perhaps even more, we wish to encourage the possibility of a home being passed on to elderly relatives, quite often dependent relatives. There is something positively socially desirable in the transmission of homes and dwelling houses to other members of the family.
That desirable aspect of policy has been recognised in many other parts of housing policy and taxation policy over many years. I begin by citing the remarkable example of the practice in local authority housing, where the original tenant has no continuing title, nothing resembling a freehold title to which he has contributed anything by any act of thrift on his part. I do not say that critically. In most parts of the country the members of the family living with the tenant who dies in practice have a title to succeed to the house.
Paragraph 208 of the Cullingworth Report says:
So far as transfer of tenancies to adult children is concerned, a distinction is made between children who have been living in the parental household for a considerable time … and those who have been living separately … In the former case the transfer of tenancy is common; in the latter less common—though much depends on the nature of the local housing shortage.
Even in these circumstances of local authority housing, with no title, no acquisition, no thrift and no saving, our social policy recognises the desirability of allowing the family of the original tenant to succeed, and the case is even stronger where rent-controlled property or regulated property is concerned.
Here again we are dealing with property where the tenant has no continuing title, nothing resembling a freehold or a leasehold to the property. He has a statutory right to remain there at the expense of the owner of the freehold who is often poorer than the person who is enjoying the right to remain on. Yet even in that situation as set out in Schedule 1 of the Rent Act 1968 there is a right to the family of the original tenant to succeed to the statutory tenancy. The original tenant can pass his tenancy on to his widow who was residing with him at his death or to a person who was


a member of the original tenant's family who had resided with him for six months before his death. If that first successor dies leaving his widow who was residing with him at the time of his death or a member of the family living with him for a minimum period of six months the tenancy can be transferred to them. There is therefore a statutory right to double inheritance to a tenancy which may be no more than a monthly tenancy. There again we see the extent to which social policy recognises the desirability of allowing families to continue living in their original homes.
Although that provision is in the 1968 Act, it dates from the original rent-control legislation passed in the palmy days of Messrs. Asquith and Lloyd George during World War I. Here at least is a residual contribution by the Liberal Party to one aspect of our current social policy. More recent legislation concerning capital gains tax allows for relief in respect of owner-occupied houses. In that situation relief is allowed without limit as to the amount, and beyond that it extends to a house that is occupied rent-free by a dependent relative. In that situation the dwelling is also relieved from capital gains tax.
That is another example of sensible social policy to adjust the impact of tax on actual social conditions. The reasons for the exemption are
to encourage home ownership, to avoid any feeling of resentment there might be—and I think that it would be widespread if this was subject to tax—and, also, from a social point of view, to assist greater mobility, which is an important matter from a labour point of view. The effect of it, as I say, is to make home ownership very attractive front the investment point of view".—[Official Report, 27th May 1965; Vol. 713, c. 997.]
Those are not my reasons; they are the reasons for such an exemption from capital gains tax produced by the previous Financial Secretary to the Treasury. Mr. Niall MacDermot, as he then was. He held the office for, as far as I recollect, very many years, but thereafter advanced no further within the ranks of his party. I do not know whether that fate will befall his successor today.
The additional relief to which I have referred, again recognising the importance of social policy and taxation policy working together, is the one granting exemp

tion from capital gains tax to the dependent relative living rent free in the house. That provision was enacted in 1965 as a result of the initiative by my hon. Friend the Member for Wycombe (Sir J. Hall). He moved an amendment on that same day's proceedings, and he was fortunate enough, again, not merely in the identity of the Financial Secretary but in the response of that Minister to the amendment. Mr. MacDermott said
There is a popular fallacy that Treasury Ministers are cold and hard-hearted and never moved by an emotional appeal, and that it is only cold, remorseless logic which will make them shift at all.
In present times that fallacy has indeed given way to fact in the case of present Ministers. Mr. MacDermott went on,
I would only point out in answering the hon. Member that in this case we do not feel that cold, remorseless logic is on this side, but, nevertheless, we are moved by the sympathetic and emotional considerations to support his case.
Those were the days, and would that we should see a similar compassionate response from present Ministers. Mr. MacDermott went on to commend the proposal to the Committee, saying
I think the Committee will agree that this is a proposal which has an obvious appeal to it, that it is not unreasonable that someone who provides a home for a dependent relative should have some benefit in respect of such property, as he does in respect of a house he occupies himself."—[Official Report, 27th May 1965; Vol. 713, c. 1003–4.]
That is the way in which we should tailor our tax legislation. We should not be introducing, as the Government are, a new tax with the mechanistic automatism of people without humanity or heart, with no exceptions, and designed to impose a tax of this kind upon the home and the family. The amendment is well designed to fulfil legitimate social purposes, and I commend it to the House.

Mr. J. Enoch Powell: I hope that in their response to the amendment the Government will not be over-influenced by the fact that it appears in itself to be ungrammatical and, much more serious, that as it is drawn it would clearly provide an immense scope for avoidance which cannot be the intention of those who designed and moved it. That is my belief and I detected no evidence in what the right hon. and learned Member for Surrey, East (Sir G. Howe) said that any such consideration was in


his mind. There are circumstances in which it would be thought unreasonable that a dwelling which is a legitimate home, and probably the sole home and a home of long standing of the deceased person, should attract, in all circumstances, capital transfer tax along with the rest of the estate.
I do not wish to waste the time of the House by proposing what will more readily occur to the Government by way of methods to introduce safeguards which would reduce this innovation to its intended scope. For instance, one could imagine that there could be a fairly low upper limit upon the value of the property.

Sir G. Howe: Far be it from me to intervene in a discussion between an ex-Treasury Minister and Treasury Ministers about tax avoidance, but the right hon. Gentleman is entirely right. If it were found necessary and sensible to propose limitations in order to prevent undesirable tax avoidance we would accept them, but the objective of the amendment is clear.

Mr. Powell: It is most helpful that the right hon. and learned Gentleman has made that clear, and I will not elaborate except to say that there could also be safeguards regarding the domiciliary connection with the particular house of the recipient under the will of the deceased person. Quite obviously as the provisions stand it would be possible to buy an immensely expensive dwelling and to arrange for the intended legatee to occupy it for two years so that it would be outside estate duty. Therefore I hope that the Government will overlook the obvious grave defects of the new subsection and have regard solely to the intention.
We are in a stronger position than usual, I believe, in making that kind of plea. I say that first because none of the rest of us has had an opportunity adequately to consider these amendments and therefore perhaps to bring points forward by amendments to amendments. That would be the proper way, rather than by this kind of debate. But even more, the fact that we are just looking forward to our next Finance Bill makes it possible for the Government in this case almost to treat it as one stage of legislation which will presently be succeeded by the next.
Whereas, therefore, it would normally be absurd for the Government spokesman to say, in responding, that he would see what could be done at the next stage, I hope that, since the next stage in financial legislation is so near in time, the Government spokesman in this case will find it in his heart to use some such well-honoured formula as that.

4.30 p.m.

Mr. John Pardoe: I rise to support what the right hon. Member for Down, South (Mr. Powell) has said. I am entirely in agreement with him on the amendment. It had occurred to me that it might be possible to seek your leave, Mr. Deputy Speaker, to introduce a manuscript amendment to the amendment which would make it very supportable on all sides of the House and even perhaps acceptable to the Government. Even as it stands, it is a very attractive amendment and I believe that its principle will gain sympathy on all sides of the House. But as the hon. and learned Gentleman has acknowledged, it is too wide. It would enable somebody, presumably on his deathbed, as has happened with agricultural land in the past, to buy an enormous house of prodigious value and thereby to a certain extent to overcome the problems of capital transfer tax. In that sense, I suppose one could say that as it stands this is almost a wrecking amendment.
I do not want to suggest to the Government how a change could be made if they were prepared to accept it in that spirit. Certainly, changes could be made to schedules later in the Bill, and on the Orders Paper there is an amendment which has not been selected which mentions an upper limit of £25,000. Whether or not that is the right limit is difficult to decide. We always discover that a limit that will do for one part of the country will not do for other parts, but that is probably as good a figure as any. Therefore, I suppose the insertion after the words "a dwelling" of the words "of a value of not more than £25,000" might well solve the problem, if not to the satisfaction of the parliamentary draftsmen.
I would say to the Government that hon. Members on all sides of the House accept that a dwelling is a rather special type of property and wealth. We accept


that in relation to capital gains tax, and therefore it seems sensible that we should accept it in relation to capital transfer tax. In the spirit in which the right hon. and learned Gentleman moved the amendment, bearing in mind what he has said and what has been said by the right hon. Member for Down, South, I hope that the hon. Gentleman will accept its principle, and perhaps he can do something to overcome its wrecking nature, if that is not too strong a way of putting it. I do not know whether we can dignify the Opposition stance—is "mechanistic automatism" better than categorising that stance as "wrecking"?—but I hope the Government can meet the arguments put forward on this side of the House.

Dr. Gilbert: I hope that I do not have to reply in kind to the right hon. and learned Gentleman the Shadow Chancellor every time he gets up, because that would be rather tedious. But when he starts by criticising my right hon. Friend and myself for being hard-hearted and for damming up the milk of human kindness, and then criticises us for giving way, after so many proddings and so many amendments moved at his behest or by those of his hon. Friends who have studied the Bill, then the illogicality of his remarks stands out in stark clarity without further comment from me. As the right hon. Member for Down, South (Mr. Powell) has observed, this amendment suffers from obvious grave defects, to use his own words and would allow a coach and horses to be driven through the whole principle of the capital transfer tax. If one accepts the good motives of right hon. Gentlemen opposite, one can only marvel at their incompetence in producing so technically defective an amendment.
It is important to point out that in many ways the reliefs that the Government are already giving under the Bill are far in excess of those contemplated in Amendment No. 502. In the first place, we have introduced for the first time in British history the principle that there shall be no charge at all to the surviving spouse on the death of a spouse with respect to any property whatsoever that is passing from the deceased spouse to the surviving spouse. For the first time, a

widow suffering bereavement and the additional economic loss of the breadwinner of the family will not simultaneously be faced with a liability to estate duty and perhaps the need to sell the home in which she has lived all her life, with a consequent rupture of friendships and social connections on which she would be particularly dependent at a time of bereavement.
This is a relieving provision which has been in the Bill from the beginning. It was introduced by my right hon. Friend without any suggestions or prodding. The idea was not even in the mind of hon. Gentlemen opposite in their proposals while in Opposition, let alone in their election manifesto.

Sir G. Howe: Lest the hon. Gentleman should become too puffed up with glory, may I point out that this is one of the foundations of the argument that I have been putting forward, that a previous Chancellor of the Exchequer, Lord Barber, introduced in his Finance Bill in 1972 provisions giving precisely to the surviving spouse a doubling of exemption from estate duty up to a figure of £30,000 in order to cover a dwelling. There are very few dwelling houses occupied by a surviving spouse that have been helped by the generosity of this Government except those occupied by the tiny minority, for whom it has had little benefit.

Dr. Gilbert: Clearly the hon. and learned Gentleman has failed to recognise that the impact of estate duty on a widow's other assets might make it necessary for her to sell the house in which she is living. I would have thought even the level of economic sophistication that the hon. and learned Gentleman has managed to reach under the tutorship of his colleagues would have instructed him on that. I am sorry that the hon. and learned Gentleman is being churlish. It is obvious that this relief, being provided by the Government without any prodding, for a widow or a widower at the time of the death of a spouse, goes far beyond anything that is on the statute book or was even conceived before my right hon. Friend entered office. Furthermore, in the terms of the amendment, the relief contemplated would be available only to a spouse who has lived with her husband


for not less than two out of the three years preceding his death. Our relief in no way relates to how long they have been married, let alone how long they have been living together. Had such a provision entered into our proposal, I should have been very surprised had there not been a storm of protest from hon. Gentleman opposite that it was an impertinence to include such provision in this relief, that it was an outrageous intrusion into people's privacy, and stuff of that kind. The relief we are offering is an absolute relief, regardless of the time that a man and woman have been married and regardless of whether they are living together at the time that death occurs. It would be only gracious of the right hon. Gentleman to acknowledge that.
The hon. Member for Cornwall, North (Mr. Pardoe) pointed out quite clearly that there was a provision in capital gains tax law recognising the particular and peculiar nature of property, in addition to the property of a deceased, where it is held for a dependent relative. Certainly I take his point, but I am sure he will recall that only yesterday evening the Government brought forward an amendment to the Bill extending relief on transfers to dependent relatives as defined under capital transfer tax. I am obliged to him for acknowledging that.
I have to tell hon. Gentlemen opposite that we see no reason why any relief which could be given for particular types of assets should be tied to the ownership of a dwelling house. It is a matter entirely for the discretion of the family whether they choose to buy a house to live in or whether they choose to rent accommodation and to invest their savings elsewhere. We see no justification for benefiting the first category more than the second. That would introduce an unjustifiable degree of favouritism and distortion. If it became possible to reduce the rate of tax we would wish to spread it over a much wider class of beneficiary than the class to which the amendment relates, and I therefore have to advise my hon. Friends not to accept the amendment.

Mr. Peter Rees: I had not proposed to intervene until I heard the words of the Financial Secretary. So outraged was I by his callous indifference and by the flimsy nature of

his arguments that I felt obliged to rise to catch your eye, Mr. Deputy Speaker.
One might have accepted from practically any hon. or right hon. Gentleman on the Government benches other than the Financial Secretary the stringent criticism which he made of the technical defects of the amendment. Had we in Committee or on Report been aware that the Financial Secretary had even a glimmering of understanding of the technicalities of his own Bill, we might have been able to accept that criticism. But the notes that passed to and from the Box and rained on him like confetti—with which he has grappled with manly incompetence—convince me and my hon. Friends that he and the Chancellor, of all members of the Treasury Front Bench, have not condescended to master the technicalities of the Bill, and when he tells us that this well-conceived, modest, charitable amendment is so grossly technically defective, and pours ridicule on it and its authors, I am moved to intervene.
The Financial Secretary made great play of the fact that the Bill, for the first time, introduces total exemption from tax for transfers between husband and wife or wife and husband. That is the one redeeming feature of this odious tax. However, mere concentration of that feature will not commend the tax either to the Opposition or to the country.
The Financial Secretary is clearly busy mastering his brief for the next set of amendments. The House would appreciate a little more courtesy from him and more concentration on the arguments addressed to him. His present stony indifference suggests to us that, far from listening to our argument, he and his hon. and right hon. Friends had made up their minds on this important question long before my right hon. and learned Friend moved the amendment. The Financial Secretary does not appear to appreciate that homes stand in a special category. They are not like other assets. Indeed, his hon. and right hon. Friends recognised that when they conceded a measure of relief yesterday for historic homes.
4.45 p.m.
We have the bizarre situation, which gives the lie to the arguments put forward by the hon. Member for Cornwall,


North (Mr. Pardoe), that a person buying Blenheim Palace may obtain a measure of exemption from capital transfer tax but a person buying a modest home in Hampstead or Highgate—to which the hon. Gentleman referred during the watches of the night upstairs—will obtain no exemption. It is not that I feel particularly tender of the interests of the spokesman for the Liberal Party, but I am moved to add my voice to that of the right hon. Member for Down, South (Mr. Powell). It may be that, at the margin, if the amendment were accepted some people might be moved to take advantage of it in a way in which the Financial Secretary and his hon. and right hon. Friends who prefer to live in rented accommodation would find unattractive.
I do not believe that one should judge these grave issues by such paltry considerations. We must take a broad view of fiscal matters. That is what the country elects us to the House to do. We must not concentrate on them the dogged gaze of the tax collector. In saying that, I intend no disrespect to that honourable and dutiful body of men. They have their duty and we have ours. Our duty is to look in a broad, farseeing, generous spirit at the fiscal measures which the Government put before us.
If a precedent is needed for this measure I remind the Financial Secretary that a special measure of relief from capital gains tax is given to those who sell their homes. If the Financial Secretary is looking for a precedent, I see no reason why a similar definition should not be inserted in the Bill.
There will be many situations in which the imposition of capital transfer tax on the death of the home owner will entirely disrupt family life. Transfers between husband and wife have been covered, but there are many widows and widowers who maintain a family home to whom the benefit of that exemption will not be available.
The Financial Secretary will say that there is relief for the first £15,000. I am sorry to have to tell him that in the South-East, in the part of the world which I have the privilege of representing, £15,000 will buy a house but not much more. It will not buy the chattels and furnishings

necessary to keep the house going, and family capital invested in real estate will be so much dead capital. It cannot readily be realised or cut up and offered to the tax gatherer. I foresee that as a consequence of this ill-conceived measure a number of family homes, in circumstances of great melancholy, will have to be sold. I hope that that will rest on the conscience of the Financial Secretary and the Chief Secretary. It obviously will not rest on the conscience of the Chancellor of the Exchequer, because we know that in these matters he is conscienceless. His personal convictions are too well known for me to comment on them.
It is interesting to note that often the cut-off point for relief is just sufficient to allow relief to Ministers on the Treasury Front Bench who have a house in Highgate, one in Sussex and a few more chattels, but for those who just transgress that limit there is no mercy. In the fullness of time they may be receiving considerable sums from the Press and, although it may be too late their attitude will alter. I ask the Financial Secretary to search his conscience once again and to allow full rein to the generosity that peeped through on occasions—

Dr. Gilbert: I want to be clear on this. Is the hon. and learned Gentleman suggesting that the level of the tax has been set deliberately at a point to benefit Treasury Ministers?

Mr. Rees: I am saying that it is a curious coincidence. The Financial Secretary can rebut this if he likes. I do not know the individual circumstances of Treasury Ministers and should be delighted to hear from the Financial Secretary just how he personally would be affected by it. It is a matter for comment that the cut-off point for most reliefs happens to be above a figure that would allow a modest house in Highgate, a small farm in Sussex, a country cottage here and there and the chattels that go with them. We all know that the Chancellor of the Exchequer, whenever he receives some money, goes out and buys—

Mr. Deputy Speaker (Mr. Oscar Murton): Order. There are certain inferences which can be drawn from what the hon. and learned Gentleman is saying which I am sure he does not mean. Care


should be used in approaching these matters.

The Chancellor of the Exchequer (Mr. Denis Healey): I am delighted to hear the horrible little man again. Is he suggesting that the level of tax has been set to suit myself? If he is making that suggestion, will he withdraw it immediately?

Mr. Rees: If the Chancellor had paid the House the courtesy of coming more often to listen to our debates, he would not perhaps have derived the wrong impression from my remark. [HON. MEMBERS: "Answer."] I shall answer in my own way and in due time the challenge which the Chancellor put to me. [HON. MEMBERS: "Answer the Chair."] I shall direct my remarks to the Chair. The Chancellor—who, if I may say so, is never hesitant in making personal attacks on whoever happens to be speaking from the Opposition Front Bench—is showing undue sensitivity. Since he feels slighted by my remarks, I hope that in future he will exercise a litte more discretion and self-restraint.
I do not happen to know the Chancellor's financial circumstances, except to the extent that he has disclosed them to the Press. We know that he has a house in a somewhat favoured part of North London and a house in the country. We do not know whether he has a family business. All I was saying was that if he had a family business, he might have thought a little more carefully about the level of tax he has imposed. He seems to be quite unconscious of the damage he will inflict on a great number of family businesses, farms and woodlands.

Mr. Bob Cryer: The hon. and learned Member for Dover and Deal (Mr. Rees) made a deliberate and specific imputation that Government Ministers have manipulated the tax for their own financial advantage. Subsequently he denied knowing the financial circumstances of any of the Ministers. In those circumstances I ask you, Mr. Deputy Speaker, to request the Member specifically to withdraw the imputation which he has clearly made.

Mr. Deputy Speaker: The hon. and learned Member for Dover and Deal (Mr. Rees) made certain passing references which were becoming in the nature of an

implication. I urge the hon. and learned Member to explain the situation more clearly.

Hon. Members: Make him withdraw.

Mr. Rees: I am always happy to respond to your invitation Mr. Deputy Speaker. My conscience is clear. If the cap fits hon. Gentlemen opposite, let them wear it.

Mr. Tam Dalyell: Outrageous!

Mr. Deputy Speaker: It is not good enough. The hon. and learned Gentleman must be courteous. He should respond in the appropriate manner.

Mr. Rees: I have been accused of having accused the other side—it is all getting a little tortuous—of manipulating for their own advantage a tax that is not yet in existence. I leave the House to judge for itself whether that could be regarded as an accusation. What I said was that the limits have been so fixed that it appears that those without family businesses or farms or woodlands will be less affected. It may be that the Chancellor has a farm. It may be that he has a family business or woodlands. If he has, fine—I admire his public spirit and the way in which he is so resolute in raising taxes for the salvation of the country by placing himself so fairly and squarely within the net. I am sorry that the right hon. Gentleman feels sensitive on this matter. [HON. MEMBERS: "Withdraw."] I am sorry that I have offended his delicate sensibilities. It is nice to know that he has delicate sensibilities because he is so ruthless about the sensibilities of others.

Mr. Healey: On a point of order, Mr. Deputy Speaker. We are familiar with the squalid and seedy insinuations of the hon. and learned Member on political quesions. Yesterday I described him as a moth-eaten McCarthy. But it is another matter to make an insinuation of improper financial motives. I suggest that the hon. Member, as I am compelled to address him, should withdraw the insinuation he has just made.

Mr. Deputy Speaker: If I may intervene at this point, I think the hon. and learned Member for Dover and Deal should in all decency withdraw that remark. It was liable to misconstruction.

Mr. Rees: If, Mr. Deputy Speaker, you would say which remark of mine could be open to misconstruction, I will bow to your observation. But I am not conscious of having imputed any financial impropriety to the Chancellor of the Exchequer. If you can point to any remark of that kind, I should be as quick as anybody in the House to withdraw it. I await your direction.

Mr. Deputy Speaker: It was a question of the implication of motives in the earlier part of the hon. and learned Gentleman's speech.

Mr. Pardoe: Further to that point of order, Mr. Deputy Speaker. It is within the recollection of the House that in the earlier part of the speech made by the hon. and learned Member for Dover and Deal (Mr. Rees), in the context of the amendment with which he was dealing, he referred to property that I own. Perhaps he gave the impression that I had spoken on the amendment because it was relevant to the price and value of the property that I own. I do not believe that was said in an offensive spirit. I do not believe that there was anything more offensive in what he said about the Chancellor of the Exchequer than in what he said about me. The Chancellor is being unnecessarily sensitive. If the hon. and learned Gentleman is being asked to withdraw the remark, it is all part of the childish nonsense in which the House has indulged in the last two or three days.

Mr. Deputy Speaker: It was an implication that involved the Treasury Bench specifically. That is the difference.

Sir G. Howe: Further to that point of order, Mr. Deputy Speaker. You will recollect that a moment ago my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) asked you to which remark in the earlier part of his speech you were addressing your request. You will also recollect that you intervened at that point to say that my hon and learned Friend was coming near to such an implication and you encouraged him to move away from it. In the circumstances your ruling went no further than saying that he was coming near to such an implication. Your warning was no doubt timeous, and my hon. and learned Friend continued his speech. Shortly after that,

the Chancellor of the Exchequer arrived with such sensitivity on the scene.

Dr. Gilbert: Further to that point of order, Mr. Deputy Speaker. You will recall that I intervened in the hon. and learned Gentleman's speech and called on him to withdraw. So far he has not been man enough to do so. He has been getting as close as he can to making dirty financial innuendoes across the Floor of the House. He knows it, and it is high time that you enforced your ruling.

Sir G. Howe: Further to that point of order, Mr. Deputy Speaker. With great respect, it is difficult to see what my hon. and learned Friend has been imputing—

Dr. Gilbert: We disagree.

Sir G. Howe: When I am trying to clarify my point of order, the reaction from the Labour benches surpasses understanding. My hon. Friend and learned Friend asked you, Mr. Deputy Speaker, to identify the remark which he was to withdraw. You said that it was a remark made in an earlier part of the speech, but his remarks at that point of time preceded your suggestion that he was coming close to making an implication.

5.0 p.m.

Mr. Deputy Speaker: I am disturbed because I feel that there was some implication of motive. I shall be grateful if the hon. and learned Member will clear up that point, to put everybody's mind at peace on this matter, and withdraw the remark.

Mr. Nicholas Ridley: On a point of order, Mr. Deputy Speaker. In Committee, a direct insinuation was made against me that I had failed to declare an interest—

Mr. Deputy Speaker: Whatever may have happened in Committee upstairs is irrelevant to what is taking place in the House.

Mr. Ridley: With respect, it is not irrelevant, because there was a direct insinuation that I had failed to declare an interest. That turned out to be totally untrue.

Mr. Deputy Speaker: Is the hon. Member still referring to the Committee stage?


That is, by custom, irrelevant to anything which may be said in the House at this time.

Mr. Patrick Cormack: On a point of order, Mr. Deputy Speaker. I suggest that the hon. Member for Cornwall, North (Mr. Pardoe) made a most sensible suggestion. Until the Chancellor walked in, this debate was entirely good-humoured, and both Treasury Ministers were smiling, although they might have disagreed, and that is fair enough. However, my hon. Friend was guilty of no dirty insinuation and should not be obliged to withdraw.

Mr. Deputy Speaker: That is entirely a matter for the Chair.

Mr. John Gorst: On a point of order, Mr. Deputy Speaker. Could you, very kindly, clear up the point you made about the withdrawal of an imputation? It is very difficult for us to know what the imputation was and what implication is being withdrawn.

Mr. Deputy Speaker: I do not know whether the hon. Member for Hendon, North (Mr. Gorst) was in fact here when the remarks were made.

Mr. Cranley Onslow: rose—

Mr. Deputy Speaker: I call the hon. and learned Member for Dover and Deal (Mr. Rees).

Mr. Peter Rees: I am grateful for your protection Mr. Deputy Speaker, in this situation.
I am extremely sorry that the delicate sensibilities of the Chancellor, the Financial Secretary and the Chief Secretary should have been affronted by my inept use of words. From my long study of the Chancellor, I know how sensitive he is to other people's feelings in these matters. Therefore I should have matched his sensitivity with an equal sensitivity. I did not appreciate that the Chancellor was taking a close personal interest in my remarks. Let me endeavour to explain.
I see that the Chancellor is now in a good humour. He appreciates this and takes it in good heart—

Dr. Gilbert: How much longer shall we have to endure this drivel? It is a disgrace. I was in the House. I rose on the original point of order when the

hon. and learned Member for Dover and Deal suggested that the rate of this tax had been carefully set to benefit members of the Treasury Bench.

Mr. Cormack: My hon. and learned Friend did not say that.

Dr. Gilbert: He did say that.

Mr. Deputy Speaker: May I refer the House to Erskine May page 419, where there is a ruling on the question of imputation of false or unavowed motives. That is the matter which troubles the Chair, and I shall be grateful if the hon. and learned Member for Dover and Deal will withdraw any imputation.

Mr. Peter Rees: I never intended to suggest that there was fianancial manipulation by the Treasury Bench. How could I? We know that their inexperience in these matters is so total that they have never become involved in any serious financial affairs.
Allow me to try to clear up the point, so that the record is absolutely clear. If Treasury Ministers owned family businesses, farms or woodlands, they might have been a little more sensitive to the damage which they will inflict. I shall not be deterred by a flurry of indignation from the Financial Secretary. We had to endure him for five weeks in Committee upstairs—

Mr. Deputy Speaker: Upstairs is no concern of the Chair in the House. Will the hon. and learned Member be generous and withdraw any possible imputation which he now made, possibly in error, on this point?

Mr. Rees: Of course I realise that because of my inexperience and my inept use of language, I frequently blunder. I am grateful to you, Mr. Deputy Speaker, for the guidance which you have given to me. If in any way I have trodden on or affronted the sensibilities of the Chancellor or of the Financial Secretary, of course I unhesitatingly withdraw. I have tried to explain that.

Mr. Deputy Speaker: The hon. and learned Member has been graceful enough to withdraw. I think it would be as well if we did not pursue the matter any further and now continue with the business of Amendment No. 502. Mr. David Howell—

Mr. Rees: Although the House may long ago have lost the thread of my discourse, I was addressing myself to the amendment.

Mr. Deputy Speaker: Inevitably, as a result of these exchanges, there has been some lapse in time. I agree that the hon. and learned Member was on his feet originally. Perhaps he will kindly continue his speech.

Mr. Rees: Just as the Opposition have uncovered, not for the first time, the sensitivities of the Government Front Bench, so the Opposition also have their sensitivities. Our sensitivities are for the continuance of family life. That is the point of my brief intervention, which was slightly prolonged. I was prompted to speak by the intemperate remarks of the Financial Secretary.
The Opposition are concerned to maintain the continuance of family life, and that is the argument behind the amendment. I believe that the Financial Secretary should rise above his indignation, ignore the technical defects, and accept it with as much a good grace as he can now muster.

Mr. David Howell: I am sorry that our debate on this important subject should have been marred halfway through by this outbreak of ill humour from the Treasury Bench.

Mr. Cryer: On a point of order, Mr. Deputy Speaker. The hon. Member for Guildford (Mr. Howell) has implied that the delay in the proceedings was due to the ill humour of the Treasury Bench, whereas it was at your specific request and command, Mr. Deputy Speaker, that the hon. and learned Member for Dover and Deal (Mr. Rees) withdrew his totally unfounded imputation.

Mr. Deputy Speaker: I am aware of that point. Now perhaps the hon. Member for Guildford will continue.

Mr. David Howell: I shall do that, Mr. Deputy Speaker. I did not intend to delay the House. But I think that Ministers should be a little less sensitive about this matter.
I was referring to the considerable importance of the amendment and to our desire to secure the family home from the onward march of this tax and Socialist

policy. The Financial Secretary rested much of his defence or rejection of the argument on the repeated claim of the Chancellor, the Chief Secretary, and the Financial Secretary that this legislation exempted the spouse and was an improvement on what had gone before. None of us has been churlish enough to deny that.
It is worth pointing out that if the spouse owns any assets, there will be a powerful incentive for the husband or wife to leave assets in a way which will leave less to the spouse and more to the children in order to minimise the capital transfer tax so that only in a case where the spouse has very little property will the benefit claimed by the Chancellor of the Exchequer work. Like so many of these other examples, it depends on the circumstances and the details.
I hope that neither the Chief Secretary nor the Financial Secretary will suggest that, if that advice is followed in the case of the spouse and the husband leaves assets not entirely to the spouse in order to minimise the liability to CTT, that should be described as a loophole, though I have no doubt that it will be so described by the Chancellor of the Exchequer. We gain the impression sometimes that in the right hon. Gentleman's view life is a loophole to escape death. That seems to be his attitude about estate duty—that anyone ill-judged enough not to die and who hands on during his life avoids death duty by doddering through a loophole. That is an absurd concept of taxation which we reject.
As for the amendment, the Financial Secretary made play with the point about there being no upper limit proposed. If he prefers an upper limit, there is a later amendment to Schedule 6, although it has not been selected, which would put an upper limit on the residence of £25,000. If the Government think that that is the right way to go about it, I have no doubt that they can submit a manuscript amendment which may find favour with the Chair for debate later. I hope also that that later amendment will stand up to the very proper grammatical demands of the right hon. Member for Down, South (Mr. Powell).
If the Government were interested in preserving quite modest family homes from this tax and in preventing people


from having to sell homes and the furniture in them in order to meet the tax, they could accept such an amendment. However, they have indicated that they are not interested in doing that. They are interested in smashing up family homes and preventing them and the furniture in them from being passed on. They will cause much misery and suffer

ing if they reject the amendment. We believe that it should be pressed, and I advise my right hon. and hon. Friends to do so.

Question put, That the amendment be made:—

The House divided: Ayes 222, Noes 272.

Division No. 131.]
AYES
[5.14 p.m.


Adley, Robert
Glyn, Dr Alan
Mills, Peter


Aitken, Jonathan
Goodhart, Philip
Miscampbell, Norman


Alison, Michael
Goodhew, Victor
Moate, Roger


Amery, Rt Hon Julian
Goodlad, Alastair
Monro, Hector


Atkins, Rt Hon H. (Spelthorne)
Gorst, John
Montgomery, Fergus


Awdry, Daniel
Gow, lan (Eastbourne)
Moose, John (Croydon C)


Banks, Robert
Griffiths, Eldon
More, Jasper (Ludlow)


Beith, A. J.
Grimond, Rt Hon J.
Morgan-Giles, Rear-Admiral


Bell, Ronald
Grylls, Michael
Morris, Michael (Northampton S)


Bennett, Dr Reginald (Fareham)
Hall, Sir John
Morrison, Charles (Devizes)


Benyon, W.
Hall-Davis, A. G. F.
Morrison, Hon Peter (Chester)


Biffen, John
Hamilton, Michael (Salisbury)
Mudd, David


Biggs-Davison, John
Hampson, Dr Keith
Neave, Airey


Blaker, Peter
Hannam, John
Nelson, Anthony


Bowden, A. (Brighton, Kemptown)
Harrison, Col Sir Harwood (Eye)
Neubert, Michael


Boyson, Dr. Rhodes (Brent)
Harvie Anderson, Rt Hon Miss
Newton, Tony


Braine, Sir Bernard
Hastings, Stephen
Normanton, Tom


Brittan, Leon
Hawkins, Paul
Nott, John


Brotherton, Michael
Hayhoe, Barney
Onslow, Cranley


Brown, Sir Edward (Bath)
Hicks, Robert
Osborn, John


Bryan, Sir Paul
Higgins, Terence L.
Page, John (Harrow West)


Buchanan-Smith, Alick
Holland, Philip
Page, Rt Hon R. Graham (Crosby)


Buck, Antony
Hooson, Emlyn
Pardoe, John


Bulmer, Esmond
Hordern, Peter
Parkinson, Cecil


Burden, F. A.
Howe, Rt Hn Sir Geoffrey
Pattie, Geoffrey


Butler, Adam (Bosworth)
Howell, David (Guildford)
Penhaligon, David


Carlisle, Mark
Howell, Ralph (North Norfolk)
Percival, Ian


Carr, Rt Hon Robert
Howells, Geraint (Cardigan)
Peyton, Rt Hon John


Chalker, Mrs Lynda
Hunt, John
Prior, Rt Hon James


Channon, Paul
Hurd, Douglas
Raison, Timothy


Churchill, W. S.
Irving, Charles (Cheltenham)
Rees, Peter (Dover &amp; Deal)


Clark, Alan (Plymouth, Sutton)
James, David
Rees-Davies, W. R.


Clark, William (Croydon S)
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Renton, Rt Hon Sir D. (Hunts)


Clegg, Walter
Jessel, Toby
Renton, Tim (Mid-Sussex)


Cockcroft, John
Johnson Smith, G. (E. Grinstead)
Ridley, Hon Nicholas


Cooke, Robert (Bristol W)
Jones, Arthur (Daventry)
Ridsdale, Julian


Cope, John
Kellett-Bowman, Mrs Elaine
Rifkind, Malcolm


Cormack, Patrick
Kershaw, Anthony
Roberts, Wyn (Conway)


Corrie, John
Kimball, Marcus
Ross, Stephen (Isle of Wight)


Costain, A. P.
King, Evelyn (South Dorset)
Rossi, Hugh (Hornsey)


Crouch, David
King, Tom (Bridgwater)
Rost, Peter (SE Derbyshire)


Crowder, F. P.
Kirk, Peter
Sainsbury, Tim


Davies, Rt Hon J. (Knutsford)
Knight, Mrs Jill
St. John-Stevas, Norman


Dodsworth, Geoffrey
Lamont, Norman
Shaw, Giles (Pudsey)


Douglas-Hamilton, Lord James
Lane, David
Shaw, Michael (Scarborough)


du Cann, Rt Hon Edward
Latham, Michael (Melton)
Shelton, William (Streatham)


Durant, Tony
Lawrence, Ivan
Shepherd, Colin


Dykes, Hugh
Lawson, Nigel
Shersby, Michael


Eden, Rt Hon Sir John
Le Marchant, Spencer
Silvester, Fred


Edwards, Nicholas (Pembroke)
Lester, Jim (Beeston)
Sims, Roger


Elliott, Sir William
Lloyd, Ian
Sinclair, Sir George


Emery, Peter
Loveridge, John
Skeet, T. H. H.


Eyre, Reginald
Luce, Richard
Smith, Dudley (Warwick)


Fairbairn, Nicholas
McCrindle, Robert
Speed, Keith


Farr, John
MacGregor, John
Spence, John


Fell, Anthony
McNair-Wilson, M. (Newbury)
Spicer, Jim (W Dorset)


Finsberg, Geoffrey
McNair-Wilson, P. (New Forest)
Spicer, Michael (S Worcester)


Fisher, Sir Nigel
Madel, David
Sproat, Iain


Fletcher, Alex (Edinburgh N)
Marshall, Michael (Arundel)
Stainton, Keith


Fletcher-Cooke, Charles
Marten, Neil
Stanbrook, Ivor


Fookes, Miss Janet
Mates, Michael
Stanley, John


Fox, Marcus
Mather, Carol
Steel, David (Roxburgh)


Fraser, Rt Hon H. (Stafford &amp; St)
Maude, Angus
Steen, Anthony (Wavertree)


Fry, Peter
Mawby, Ray
Stewart, Ian (Hitchin)


Gardiner, George (Reigate)
Maxwell-Hyslop, Robin
Stokes, John


Gardner, Edward (S Fylde)
Mayhew, Patrick
Stradling Thomas, J.


Gilmour, Rt Hon Ian (Chesham)
Meyer, Sir Anthony
Taylor, R. (Croydon NW)


Gilmour, Sir John (East Fife)
Miller, Hal (Bromsgrove)
Tebbit, Norman




Temple-Morris, Peter
Walker, Rt Hon P. (Worcester)
Wood, Rt Hon Richard


Thatcher, Rt Han Margaret
Walker-Smith, Rt Hon Sir Derek
Young, Sir G. (Ealing, Acton)


Townsend, Cyril D.
Walters, Dennis
Younger, Hon George


Tugendhat, Christopher
Weatherill, Bernard



van Straubenzee, W. R.
Wells, John
TELLERS FOR THE AYES:


Vaughan, Dr. Gerard
Wiggin, Jerry
Mr. Anthony Berry and


Viggers, Peter
Winterton, Nicholas
Mr. Russell Fairgrieve.


Wakeham, John






NOES


Abse, Leo
Ellis, Tom (Wrexham)
MacCormick, Iain


Allaun, Frank
English, Michael
McGuire, Michael (Ince)


Anderson, Donald
Ennals, David
Mackintosh, John P.


Archer, Peter
Evans, loan (Aberdare)
Maclennan, Robert


Armstrong, Ernest
Evans, John (Newton)
McMillan, Tom (Glasgow C)


Ashley, Jack
Ewing, Harry (Stirling)
McNamara, Kevin


Ashton, Joe
Fernyhough, Rt Hon E.
Madden, Max


Atkins, Ronald (Preston N)
Fitt, Gerard (Belfast W)
Magee, Bryan


Bagier, Gordon A. T.
Flannery, Martin
Mahon, Simon


Bain, Mrs Margaret
Fletcher, Ted (Darlington)
Marks, Kenneth


Barnett, Guy (Greenwich)
Foot, Rt Hon Michael
Marshall, Dr Edmund (Goole)


Bates, Alf
Ford, Ben
Marshall, Jim (Leicester S)


Bean, R. E.
Forrester, John
Mason, Rt Hon Roy


Benn, Rt Hon Anthony Wedgwood
Fowler, Gerald (The Wrekin)
Meacher, Michael


Bennett, Andrew (Stockport N)
Fraser, John (Lambeth, N'w'd)
Mellish, Rt Hon Robert


Bidwell, Sydney
Freeson, Reginald
Mikardo, Ian


Blenkinsop, Arthur
Garrett, John (Norwich S)
Miller, Dr M. S. (E Kilbride)


Boardman, H.
Garrett, W. E. (Wallsend)
Miller, Mrs Millie (Ilford N)


Booth, Albert
Gilbert, Dr John
Mitchell, R. C. (Soton, Itchen)


Boothroyd, Miss Betty
Ginsburg, David
Moonman, Eric


Bottomley, Rt Hon Arthur
Golding, John
Morris, Alfred (Wythenshawe)


Boyden, James (Bish Auck)
Gould, Bryan
Morris, Charles R. (Openshaw)


Bradley, Tom
Gourlay, Harry
Mulley, Rt Hon Frederick


Bray, Dr Jeremy
Graham, Ted
Murray, Rt Hon Ronald King


Brown, Hugh D. (Provan)
Grocott, Bruce
Newens, Stanley


Brown, Robert C. (Newcastle W)
Hamilton, W. W. (Central Fife)
Noble, Mike


Brown, Ronald (Hackney S)
Hardy, Peter
Oakes, Gordon


Buchan, Norman
Harper, Joseph
Ogden, Eric


Butler, Mrs Joyce (Wood Green)
Harrison, Walter (Wakefield)
O'Halloran, Michael


Callaghan, Jim (Middleton &amp; P)
Hattersley, Rt Hon Roy
O'Malley. Rt Hon Brian


Campbell, Ian
Hatton, Frank
Orbach, Maurice


Canavan, Dennis
Hayman, Mrs Helene
Ovenden, John


Cant, R. B.
Healey, Rt Hon Denis
Owen, Dr David


Carmichael, Neil
Heffer, Eric S.
Padley, Walter


Carter, Ray
Henderson, Douglas
Palmer, Arthur


Carter-Jones, Lewis
Hooley, Frank
Park, George


Castle, Rt Hon Barbara
Horam, John
Parker, John


Clemitson, Ivor
Howell, Denis (B'ham, Sm H)
Parry, Robert


Cocks, Michael (Bristol S)
Hoyle, Doug (Nelson)
Pavitt, Laurie


Cohen, Stanley
Huckfield, Les
Peart, Rt Hon Fred


Colquhoun, Mrs Maureen
Hughes, Rt Hon C. (Anglesey)
Pendry, Tom


Conlan, Bernard
Hughes, Mark (Durham)
Perry, Ernest


Cook, Robin F. (Edin C)
Hughes, Robert (Aberdeen N)
Phipps, Dr Colin


Corbett, Robin
Hughes, Roy (Newport)
Prentice, Rt Hon Reg


Cox, Thomas (Tooting)
Hunter, Adam
Price, William (Rugby)


Craigen, J. M. (Maryhill)
Irving, Rt Hon S. (Dartford)
Radice, Giles


Crawford, Douglas
Jackson, Colin (Brighouse)
Reid, George


Cronin, John
Jackson, Miss Margaret (Lincoln)



Crosland, Rt Hon Anthony
Janner, Greville
Richardson, Miss Jo


Cryer, Bob
Jay, Rt Hon Douglas
Roberts, Albert (Normanton)


Cunningham, G. (Islington S)
Jeger, Mrs Lena
Roberts, Gwilym (Cannock)


Dalyell, Tam
Jenkins, Hugh (Putney)
Robertson, John (Paisley)


Davidson, Arthur
Jenkins, Rt Hon Roy (Stechford)
Roderick, Caerwyn


Davies, Bryan (Enfield N)
Johnson, James (Hull West)
Rodgers, George (Chorley)


Davies, Denzil (Llanelli)
Johnson, Walter (Derby S)
Rodgers, William (Stockton)


Davies, Ifor (Gower)
Jones, Dan (Burnley)
Rooker, J. W.


Davis, Clinton (Hackney C)
Kaufman, Gerald
Roper, John


Deakins, Eric
Kelley, Richard
Rose, Paul B.


Dean, Joseph (Leeds West)
Kerr, Russell
Ross, Rt Hon W. (Kilmarnock)


de Freitas, Rt Hon Sir Geoffrey
Kilroy-Silk, Robert
Ryman, John


Dell, Rt Hon Edmund
Kinnock, Neil
Sandelson, Neville


Dempsey, James
Lambie, David
Sedgemore, Brian


Doig, Peter
Lamborn, Harry
Selby, Harry


Dormand, J. D.
Lamond, James
Shaw, Arnold (Ilford South)


Douglas-Mann, Bruce
Leadbitter, Ted
Sheldon, Robert (Ashton-u-Lyne)


Duffy, A. E. P.
Lever, Rt Hon Harold
Shore, Rt Hon Peter


Dunn, James A.
Lewis, Ron (Carlisle)
Short, Rt Hon E. (Newcastle C)


Dunnett, Jack
Lipton, Marcus
Short, Mrs Renée (Wolv NE)


Dunwoody, Mrs Gwyneth
Loyden, Eddie
Silkin, Rt Hon John (Deptford)


Eadie, Alex
Luard, Evan
Silkin, Rt Hon S. C. (Dulwich)


Edelman, Maurice
Lyon, Alexander (York)
Sillars, James


Edge, Geoff
Lyons, Edward (Bradford W)
Silverman, Julius


Edwards, Robert (Wolv SE)
McCartney, Hugh
Skinner, Dennis







Small, William
Tierney, Sydney
Whitlock, William


Smith, John (N Lanarkshire)
Tinn, James
Willey, Rt Hon Frederick


Snape, Peter
Tomlinson, John
Williams, Alan (Swansea W)


Spearing, Nigel
Torney, Tom
Williams, Alan Lee (Hornch'ch)


Spriggs, Leslie
Urwin, T. W.
Williams, Rt Hon Shirley (Hertford)


Stallard, A. W.
Varley, Rt Hon Eric G.
Williams, W. T. (Warrington)


Stewart, Donald (Western Isles)
Wainwright, Edwin (Dearne V)
Wilson, Alexander (Hamilton)


Stewart, Rt Hon M. (Fulham)
Walden, Brian (B'ham, L'dyw'd)
Wilson, Gordon (Dundee E)


Stoddart, David
Walker, Harold (Doncaster)
Wilson, Rt Hon H. (Huyton)


Stott, Roger
Walker, Terry (Kingswood)
Wilson, William (Coventry SE)


Strang, Gavin
Ward, Michael
Wise, Mrs Audrey


Strauss, Rt Hon G. R.
Watkins, David
Woodall, Alec


Summerskill, Hon Dr Shirley
Watkinson, John
Wrigglesworth, Ian


Taylor, Mrs Ann (Bolton W)
Watt, Hamish
Young, David (Bolton E)


Thomas, Jeffrey (Abertillery)
Weitzman, David



Thomas, Mike (Newcastle E)
Wellbeloved, James
TELLERS FOR THE NOES:


Thomas, Ron (Bristol NW)
Welsh, Andrew
Mr. James Hamilton and


Thompson, George
White, Frank R. (Bury)
Mr. John Ellis.


Thorne, Stan (Preston South)
White, James (Pollok)

Question accordingly negatived.

Clause 25

LIABILITY FOR TAX

Mr. Nigel Lawson: I beg to move Amendment No. 55, in page 19, line 18, leave out from provisions' to end of line 21.

Mr. Deputy Speaker: With this we may discuss the following amendments:
No. 56, in line 25, after 'transferee', insert:
'Provided always that the transferor and the transferee or, when appropriate, the personal representatives of either of them, may within two years of the date of a chargeable transfer, Jointly state by notice in writing to the Board that one or the other shall be primarily liable, in which event the other shall be discharged from all liability unless and until the one made primarily liable shall fail to pay the tax assessed on him;'.
No. 153, in Schedule 4, page 62, line 6, at end insert:
'(2) In the case where the instalments of tax mentioned in sub-paragraph (1) above are paid by the transferor, they shall not be regarded as chargeable transfers, and no tax shall be payable upon them.'

Mr. Lawson: This is a paving amendment to Amendment No. 56. I hope that this will be a briefer debate than the last one. Now that the Chancellor has left the Chamber it will be a much more courteous debate. What is at issue is a problem that we came up against in Standing Committee. Unfortunately it was not satisfactorily resolved on that occasion. I do not think that there is any fundamental difference between the two sides of the House on this issue. What is wrong with the Bill as it stands and what the amendments seek to put right is that the Bill is not precisely as

the Government intend it to be. If we can we intend to persuade the Government to accept these amendments and so to put the Bill right.
The question is whether the liability for paying tax rests with the donor or with the donee or whether it is the Government's intention—and we believe this is necessary—that the two parties to a transfer shall have the right to elect which one will bear the tax. At first sight it may seem relatively unimportant whether the tax is paid by the donor or by the donee. In terms of a single transfer the same amount of tax will be payable either way. In fact, it is very important whether the donor or the donee pays the tax. Under Schedule 4 the donee can pay by either eight annual or 16 half-yearly instalments with no interest payments if he pays on the due date, whereas the donor has no right to spread his payment of the tax over eight years. That makes a big difference.
The difference between whether the donor or the donee pays the tax is further increased because of the £1,000 exemption. If the donor pays, and he has to pay in one year, he receives only the £1,000 exemption, whereas if the donee pays he can spread the payments over eight years and he will have an £8,000 exemption. It is a matter of considerable importance whether the donee can elect to pay the tax.
As I have said, this matter was discussed in Standing Committee. On 12th February, which was one of the days on which the matter was discussed, the Financial Secretary said:
As regards the grossing up provisions, it is immaterial when the transferee and the transferor make the agreement between them, if they do make such an agreement, as to where the burden of the tax shall fall. In the absence of any agreement, it falls on


the transferor, and recourse is had to him until his assets are exhausted. The hon. Gentleman
—the Financial Secretary was referring to me—
is quite right. But that presumption can be rebutted if there is an agreement between the transferor and the transferee that the transferee shall pay the tax."—[Official Report, Standing Committee A, 12th February 1975; c. 1336.]
We are seeking to make it clear that there is the possibility of such an agreement. Clearly that is the Government's intention. On 17th February the Chancellor, rather surprisingly, made a statement to the Daily Express rather than to the House. I refer to the article which appeared on 18th February. I shall not read it at length, but there was a section headed "Spreading the payments". The Chancellor was asked:
Suppose I own a filling station or a shop valued at, say, £50,000. I give it to my son. How much tax must be paid and—assuming there are no other assets—would the filling station or shop have to be sold to pay the tax?
The Chancellor replied:
The tax cannot be spread in this way if you are paying it, but, provided your son undertakes the responsibility of paying the tax, you can, in practice, get the benefit of the instalment arrangement by making a gift to him of the amount of each tax instalment as it becomes due, which he can then pass on to the Revenue.
That is very important. It is slightly surprising, but we understand that the Chancellor does not feel up to facing the interrogation of my hon. Friends in the Chamber; it seems that he is prepared to answer only questions put by the reporter from the Daily Express. But we are grateful for his answers.

Mr. Ridley: They are wrong.

5.30 p.m.

Mr. Lawson: My hon. Friend says, "They are wrong." However, I think that we must take it that the Chancellor intended to do this. There is nothing in the Bill which makes the position clear. This was conceded by the hon. Member for Llanelli (Mr. Davies), a distinguished lawyer, who said, when the point was raised,
The hon. Member for Blaby (Mr. Lawson) was, I think, on a good point when he asserted that there was nothing in the Bill to state that one could elect as between donor and donee. My understanding also was that the

liability was a joint and several liability, according to the Bill".—[Official Report, Standing Committee A, 12th February 1975; c. 1344.]
That is how the Bill is drafted. We had hoped that there would be an amendment, but there is no amendment other than that which we are now discussing.
This is an important matter because it affects the amount of tax that is payable and the time over which it is paid in view of the £1,000-a-year exemption over the period. If it is not clear that the donor or the donee can elect who is to pay, the Revenue will be able to go for the tax against the donor and get the money in one year instead of eight years and, indeed, get more money that way. Clearly, that was not the Government's intention, as was made abundantly plain by the Chancellor's answer in the Daily Express, which I am sure the Government will wish to honour, but which has not been honoured in the Bill.
There is another point about the Chancellor's interview which is reported in the Daily Express. The right hon. Gentleman—I will repeat this section—said:
… you can, in practice, get the benefit of the instalment arrangement by making a gift to him of the amount of each tax instalment as it becomes due, which he can then pass on to the Revenue.
Hon. Gentlemen opposite may not appreciate that there is some curiosity about this point. It would appear that if a father passes money to the son to pay the instalment of tax, that instalment will be liable to capital transfer tax. Therefore, he will not be able to pass it on to the Revenue.
Therefore, we have put down Amendment No. 153, which is being discussed with this group of amendments, which ensures that no capital transfer tax will be payable on payments made by the transferor to the transferee to enable the transferee to pass them on to the Revenue. That appeared to be what the Chancellor was saying in the Daily Express interview. We wish to allow him to keep faith with what he said there. Despite the performance that we have witnessed recently, we believe that the Chancellor will wish to keep faith with what is printed in the Daily Express. We had various other debates in which it was clear that that was the sense of what the Government intended.
Finally, in commending the amendment to the House and hoping that the Government will accept it because it fulfils what clearly is their intention, I point out that the rates for this tax are very high. The Government have sought to reduce those rates, but the reduction is not very great. When the rates first came out, the tax payable on the transfer of a business with a net value of £250,000, according to a Written Answer given to my hon. Friend the Member for St. Marylebone (Mr. Baker) by the Financial Secretary, worked out at roughly 117 per cent. When the new lifetime scheme was introduced, which reduced the rates, which the Government accepted were too high, the tax payable on a business worth £250,000 seemingly—again this appears in a Written Answer by the Financial Secretary to me on 21st February—went down to 74 per cent., which was a very big drop.
When I asked, in a further Written Question, to which the hon. Gentleman gave a Written Answer on the same day, 21st February, what would happen if capital gains tax were included, assuming, looking to the future, that the business had been held for 25 years and that there had been inflation at 10 per cent. per annum and during that time the business had merely maintained its value in real terms—in other words, had gone up by 10 per cent. per annum in money terms but was worth no more—the amount of tax payable as a proportion of the asset transferred was given as 121 per cent. That is a staggeringly high figure, which the Government originally conceded was too high, which gives the lie to another of the Chancellor's remarks about the rates being no higher than estate duty.
Under the old estate duty, during lifetime one paid capital gains tax on disposal, not estate duty, and on death one had estate duty, not capital gains tax. However, under the Government's proposals we have both taxes both in lifetime and on death. Therefore, what the Chancellor has been saying ad nauseam about the rates of tax being no higher than the old estate duty is sheer nonsense. That can be put down only to his ignorance of the tax which he is nominally fathering. Therefore, anything which can minimise the savage impact of this tax is important.
The amendment would seem technical, but, if accepted—I am sure that the Government's intention is that it should be accepted and that there should be a right of election whether the donor or the donee should pay—it would slightly mitigate the severity of the tax. I hope that the amendment will be accepted without a Division.

Mr. Ridley: How calm and pleasant the atmosphere has become now that the Chancellor has again left the Chamber. I hope that he will not attend our debates too often because he generates more heat than light. Whenever the right hon. Gentleman has talked about this tax he has revealed his total lack of comprehension of it. It is all good, clean fun in the House of Commons, but when he starts extending it to the Daily Express it is going too far.
I must remind the Financial Secretary of what we read in the Daily Express. That paper, unlike Hansard—nobody reads Hansard—is read by millions of people. The Daily Express has the biggest circulation of any newspaper.

Mr. Lawson: It is a paper with one of the biggest circulations, not the biggest.

Mr. Ridley: My hon. Friend always puts me right on matters of fact. Referring to this famous shop or garage having been transferred, the Chancellor said that the donor, the transferor, could pay the instalments of tax if the transferee accepted liability for the tax. That is not so. If the transferor pays the instalments they are capital transfers which attract further taxation.
It is no good saying, as the Chief Secretary said in Committee, that he was not defending the Chancellor and was not interested in his remarks, but merely wanted to talk about the amendment. We want to know how that article, with its terribly misleading statement, appeared under the name of the Chancellor of the Exchequer. The Chancellor showed himself woefully ignorant of everything to do with the tax by using his brute force rather than the skill and expertise that we have come to expect from the Chief Secretary and the Financial Secretary. We welcome their careful attention to the details of the tax. We wish that the Chancellor would emulate them. The


matter must be cleared up. Is what is reported in the Day Express right?
I have put down some amendments to meet all the Chancellor's points in the Daily Express article. I am surprised and saddened that his name has not appeared under my name on the amendments, signifying that the Government wish to accept them. I put down amendments all over the Bill. I spent a whole evening working out the legislative implications of the article in the Daily Express and I have drafted the amendments with great care. I am surprised that I have not yet seen the Chancellor's name on my amendments. However, we know that the Treasury is very late in getting its amendments down and is having great difficulty in doing the drafting. Therefore, I am living in hopes that it has not yet got around to it and that the amendments will appear on Monday with the Chancellor's name on them.
Another worry arises from the amendments. I should like, for the sake of example, to take Mr. Freeman and Mr. Hardy. Mr. Freeman gives Mr. Hardy a sum of money. Shall we say it is shares? Suppose Mr. Freeman gives £100,000 worth of shares in the National Enterprise Board to Mr. Hardy, and two years later Mr. Freeman dies. The original transfer will have been taxed at lifetime transfer rates. The tax liability arose at the time of the transfer, and Mr. Hardy, who received the gift, had agreed to pay the tax. Unfortunately, in those two years the NEB does not do frightfully well and the £100,000 worth of shares which Mr. Hardy received are worth £10,000—a likely forecast of how that corporation will proceed. On the death of Mr. Freeman the tax has to be increased because it counts for tax within the three-year period and Mr. Hardy is called upon to pay a far greater sum of tax. Indeed, it may be greater than the amount he has left of the gift that was given to him if he has been foolish enough to invest in the NEB.
That is a possible set of circumstances, and it is directly relevant to the amendment. It shows how iniquitous is a tax when somebody who is a recipient of a gift carries a liability of unknown dimensions till such time as three years are up. In no sense, under estate duty, did anybody

carry this liability, because the assessment to tax was on the value of the estate at the time that the transferor died, whereas in the case of an earlier death the liability to tax arises two years before and the valuation is taken then.
This is an example of a gross injustice, and the amendment would go a long way to meeting it. If the Financial Secretary is not keen on the amendment will he consider that at any time when there is a death after a lifetime transfer, a death within a three-year period following a lifetime transfer, the person who is liable to pay the tax can elect to pay the tax either on the value at the time of the transfer, or on the value at the time of the death? That election is not possible under the Bill at present—if we know how the Bill is at present, which, of course, we do not, but perhaps there are some who do. But it does not seem to be possible, and it is very unfair and onerous that it should be so.
It is the sort of point which the Government should deal with on the next Finance Bill. We have not long to wait for that—next month, I think—and we shall be looking for about 100 new clauses to tidy up this tax. Could one of them be that the taxpayer has the right to elect for payment if he is made responsible for paying the tax either at the value pertaining at the time of the transfer or for payment at the time of the death which caused him to go into the death rate rather than the lifetime gift rate?
This potential tax liability, now that the lifetime concession has been made, is the most obnoxious feature of the tax. I suppose it was inevitable in a tax which was originally drafted on the basis of a flat rate of tax whether one died or gave property during one's lifetime. The switch to a lifetime concession, welcome though it is, has raised a whole series of complicated problems at the margin, which is another reason why it would have been better if the Government had taken away the tax and put it to a Select Committee for proper consideration.
As the Government are obstinate and stubborn and will not do that, will they address themselves to the point that it is necessary to allow an election as I have described? Otherwise there could be cases of real unfairness and hardship


Being given something by somebody could result in a person being bankrupted by having to pay taxes on a totally unrealistic valuation when the money is no longer there simply because somebody else dies. That, surely, cannot be the intention of the Government.

5.45 p.m.

Dr. Gilbert: I agree with the hon. Members for Blaby (Mr. Lawson) and Cirencester and Tewkesbury (Mr. Ridley) that the atmosphere has calmed considerably, though it has happened for reasons quite different from those put forward by the hon. Gentlemen.
The hon. Member for Blaby addressed himself to Amendments Nos. 56 and 153. The debate has centred around those two amendments, and in the interests of despatch, which I think is what the Opposition want, I shall confine myself to dealing with them.
Amendment No. 56 would give the transferor and the transferee the right between them to decide which of them should be primarily liable to the Revenue for the tax on a lifetime gift. Clause 25(2), to which Amendment No. 56 attaches, imposes a liability on both the transferor and the transferee. As between the transferor and the transferee the clause lays down no rules as to priority. Each of them is liable for the whole tax, except in so far as the position is modified by Clause 27(5) which postpones the transferee's liability until it becomes overdue. This is normally a period of six months, but there is a Government amendment to extend that period in certain cases.
Clause 25, to which Amendment No. 56 attaches, is concerned with identifying the persons from whom the Revenue can collect the tax. It is not concerned with who bears the tax at the end of the day. That is a matter which the transferor and the transferee are already free to decide between them, and the effect of their arrangements must, of course, affect the quantum of the gift and, consequently, the amount of tax that will be chargeable.
Since the transferor and the transferee are free to decide who will bear the tax and thus, in effect, to decide whether the grossing up provision should come into effect, and whether we are talking about a gross or net gift, there is no good reason

for giving them the further right by agreement in effect to limit the powers of the Revenue to collect the tax. Let me explain how that consequence would come about.
The transferee might be overseas, and the Revenue might within a period of a couple of years allowed by the amendment have already embarked upon proceedings to collect the tax from the transferor. At some subsequent time just before the end of two years the transferor and the transferee may say that it is not the transferor but the transferee who should pay the tax. That would put the Revenue back to precisely where it started, and might make its claim unenforceable.

Mr. Lawson: That problem could be met by the fact that election of who is to be liable has to be made at the time of the transfer. There is no problem of something happening later. The problem that is worrying us is that, in the Bill as drafted, if the transferee decides that it will be paid by him in eight yearly instalments and in the first year he pays one-eighth, but the Revenue decides that it wants the other seven-eighths that year and that the transferor is liable, the charge will go to him. Therefore, the privilege of spreading the payment over eight years which the Chancellor showed in his Daily Express article, was intended, will have been removed.

Dr. Gilbert: The hon. Member for Blaby is under a misapprehension. If the right exists for the tax to be paid by eight annual instalments, that right remains. There will be no question whatever of the Revenue suddenly saying in the middle of that process, "We want it all at once". The hon. Gentleman is putting up an Aunt Sally that does not exist. If that is his concern, I can put his mind at rest.
The purpose of Amendment No. 153 is to exempt gifts made for the purpose of enabling the donee to pay tax by instalments. The basic principle of the tax is that a gift includes the tax upon it in so far as the grossing up provisions are concerned. There is no difference between an instalment of tax and the whole tax in this respect.
In logic, if we were to concede the principle that an instalment of tax should be


free of the grossing-up provisions we should have to extend the principle to the whole tax. This would mean that the principle that the gift includes the tax upon it could be entirely sidestepped, if the donor made his gift on terms that the donee should bear the tax and then gave him money with which to pay the tax and that was not taxable.
The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) made a good point when he referred to the case of a death after a lifetime transfer of the assets which subsequently had a different value. There could be difficulties there and I certainly give him the undertaking he sought, that I will see whether any relief can be found to meet his anxieties.

Mr. Ridley: I am grateful to the Financial Secretary. Could he tell hon. Members what he will do about the article in the Daily Express when the point of the amendment, which he denied, was put forward as policy by the Chancellor under his own name? If he does not have a copy of that article I am sure he can be provided with one.

Mr. Peter Rees: I wish to address myself briefly to Amendment No. 56, which might appear to be technical in form and content but which raises a point of considerable importance. Since the Financial Secretary says that he has not had time to deal with the point made by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) I hope he will do the House the courtesy of listening to other interventions on this point.
The hon. Gentleman has singularly failed to appreciate the genuine concern of Conservative Members about this matter. The quantum of tax is different depending on whether it is paid by the transferor or the transferee. This is the first time that this provision has been implemented under the British fiscal system. The Revenue will be tempted to look first to the transferor. Indeed, the primary liability, as we were told in Committee, rests with the transferor. There should be some "let out"—I am sure that will be expanded to mean a loophole by the Government benches—for the taxpayer. The taxpayer should be given the right to elect who should pay the tax. The Financial Secretary has

said that who bears the tax is a matter for decision between the transferor and the transferee but according to the Bill that is not so.
The Revenue could decide to proceed against the transferor because it will get a larger measure of tax on a lifetime gift and it is possible that it will pursue that through the courts. It would be idle for the transferee to say "But we have agreed between ourselves that the transferee should bear the tax", it being a lesser amount, because the Financial Secretary's minions would then say "Ah, but the prime responsibility rests with the transferor and we are entitled to enforce this charge against the transferor."
Amendment No. 56 is directed to guard against this situation. Nothing that I have heard from the Financial Secretary reassures me on this point. What prejudice would there be to the Revenue if Amendment No. 56 were adopted? If it were adopted there would be a right of election as between transferor and transferee. The transferee could elect to pay the tax. If the Revenue is unable to collect from him it could go to the transferor. It is a novel principle in English tax law that the quantum of tax from the same transaction differs depending on whether it is collected from the transferor or the transferee. Therefore, it is of crucial importance that those who are likely to be affected should be entitled to opt for the conclusion that will benefit them most.
The Financial Secretary sought to reassure us in Committee that the Revenue would not endeavour to collect the greater amount of tax from the transferor. However, there will always be that temptation, especially if the transferee is not immediately available. This amendment is to make sure that the fire of the Revenue will be directed, in the first instance, at the transferee. The Revenue's position is protected should it not be able to reach that target. It can then go against the transferor.
If the Financial Secretary cannot reassure hon. Members on this point we shall be left with the unworthy suspicion that there will be many cases where a larger amount of tax will be collected from the transferor because it suits the Revenue's book and that the interests of the taxpayer will once again go by default.

Mr. Ian Lloyd: I should like to speak on this interesting point of principle. There is something quite extraordinary in the grossing-up provision. If there is no grossing-up in a transfer tax of this kind there will be a net tax which will be constant, independent of whether it is paid by the transferor or the transferee. Therefore, the joint wealth of both parties would be reduced exactly by the amount of the tax. However, the moment the grossing-up principle enters into the process of taxation we get, between the net tax on the joint wealth of both parties, a distinction which is different in one circumstance from what it would be in the other. This is the most extraordinary philosophical basis of taxation the House has ever been asked to consider.
By what extraordinary criterion has this grossing-up provision been introduced into the Government's thinking? By what strange set of criteria do the Government decide that in one case the net wealth of the two parties should be reduced by an amount £X and in another case that it should be reduced by an amount £Y? I am sure that this has been explored in some detail in Committee. However, I, the House and the country would like a little more elaboration from the Chief Secretary of what lies behind the Government's thinking in developing this fiendishly ingenious and fiendishly destructive tax.

Mr. Denzil Davies: I refer to Clause 25(2), which is a complicated subsection. The Opposition may well have understood it correctly, but I believe there is a slight misunderstanding among some Conservative Members when they say that the primary liability falls on the transferor. Clause 25(2) deals with the liability for payment of tax. Subsection (2)(a) says that the persons liable are:
the transferor and the transferee".
They are put together. That means that there is joint and separate liability on the transferor and transferee. That is legal language.
Leaving aside grossing-up and the complications following from that it means that the transferor and transferee can get together and pay the whole amount of tax or the transferor can pay the tax. If the transferor pays the tax

he discharges the full, several or separate liabilities. If the transferee pays the tax he discharges the full liability.
6.0 p.m.
So it is not a case, I should have thought, of the Revenue being able first of all to go against the transferor, because if the transferee discharges the full liability, the separate or several liability has been discharged and the whole of the tax has been paid. If the tax has been paid by the transferee the gross income does not apply. If, on the other hand, it is paid by the transferor—again, discharging the whole liability by himself—then the grossing-up provisions do apply.
I am glad that my hon. Friend mentioned instalments. Where there is some difficulty is where the transferee decides to pay the tax, but over eight years. In the first year only one-eighth of that joint and several liability has been discharged, and grossing-up does not apply to that one-eighth. But what about the second, third and fourth years? Presumably, if the transferee pays the tax in the second year, again grossing-up does not apply. The transferor cannot discharge the tax in the second year, presumably, because he is not allowed to pay by instalments.
I understand the principle of the joint and several liability, but if my hon. Friend says that the Revenue would not go back against a transferor in the case of a payment by instalment I should have thought that sufficient to satisfy the Opposition. There is some difficulty here. Because the transferor is not entitled to pay by instalments and because there is a spreading over eight years, one can see some difficulty in theory.
I am happy to abide by the assurances that we have had, and I hope that the Opposition will do the same, but it is not a question of a primary liability on the transferor: it is a joint and several liability which either party could fulfil completely.

Mr. David Howell: My hon. Friends and the hon. Member for Llanelli (Mr. Davies), who made a notable contribution in Committee on this point and in many other parts of our debates, have put their finger precisely on the difficulty and the apparent conflict in the Bill. It has been said many times—I have here a particular example when the Financial


Secretary said it, but the Chancellor has, too—that this is a donor- or transferor-based tax and that the primary liability is laid on the donor. In case there is any doubt, the Financial Secretary said in Committee that
the primary liability … is laid upon the donor".—[Official Report, Standing Committee A; 12th February 1974, c. 1347.]
This is clear.
Treasury Ministers have made some play with the importance of the principle that the donor is liable to pay the tax. I do not see how there can be any ambiguity about what the Financial Secretary and the Chief Secretary believe to be the central principle of the Bill. If the Bill becomes an Act, no doubt that is the principle upon which those who seek to collect and levy the tax will base all their calculations. To be fair, without any amendment or clarification of this point, they would be right to do so.
That is the present position. In case not every hon. Member has been able to follow all the appalling ins and outs of the tax, let us make it clear what an important principle this is. If the donor pays, we know that the grossing-up takes place and the tax itself, as well as the amount, is a chargeable transfer. We know that he will be paying anyway in relation to any previous gifts that he has made, so the accumulating principle will come into play. We know that, when the donor pays, he will not be allowed—so both Ministers have told us—to pay by instalments, nor will he have any of the other rights regarding interest and so on. It will literally be the difference between the gift, particularly if it is a family firm or a farm, being smashed up or sold to another firm, or remaining intact. That is a crucial difference, affecting the jobs and interests not just of the transferor, the proprietor or farmer, but of all the workpeople who derive their livelihood from that concern. It matters intensely that we get this matter right, and we cannot let it rest until we do.
It should be made clear in the Bill that there is a right of election. Both the Chief Secretary and the Financial Secretary have got a little confused—who can blame them, with all the complexities of this matter?—and the donor liability

point which they have made several times is not entirely right. What they mean is that an election is necessary. We have that on high authority. The Chancellor said explicitly in the Daily Express that that was the situation.
I make no apology for quoting the Chancellor's words yet again, because they are explicit and they reinforce precisely the point that there is an election, there is freedom to choose, whether the donor or the donee shall pay. If that is so, we say that that situation should be reinforced in the Bill. The Chancellor said:
The tax cannot be spread in this way if you are paying it, but provided your son undertakes the responsibility of paying the tax you can in practice get the benefit of the instalment arrangement by making a gift to him of the amount of each tax instalment as it becomes due, which he can then pass on to the Revenue.
That is an absolutely explicit and clear statement which the Chancellor is entitled to make.
I know that there may be some small print or things unsaid which may be brought into play to suggest that perhaps that example is rather special, but the ordinary reader—indeed, the reader who is familiar with the ins and outs of the tax, like my right hon. and hon. Friends who have studied the matter closely—can draw only one general and crystal-clear conclusion. It is that there is a freedom to choose between the donor and the donee paying.
The reason that it matters so crucially is precisely that, as the hon. Member for Llanelli has so clearly said and as my hon. Friend the Member for Blaby (Mr. Lawson) has said, ambiguity is bound to arise, if, after a year, an instalment is paid by the donee and the Revenue, taking their lead from the Financial Secretary and the Chief Secretary, and reading that, apparently, the Bill unamended—or the Financial Secretary's interpretation of it—still insists that the primary liability is on the donor, will proceed, rightly, in its professional capacity to collect the revenue due from the donor. When it does so, of course, it will be getting much more revenue much sooner than it would if the instalments were paid ungrossed-up by the donee.
It is important that we know. It is clear that there is a right of election and


that that election is made in precisely the sort of transaction about which the Chancellor was talking—the garage with a turnover of £50,000, or the shop or farm with a turnover of £100,000, or any small business employing 20 or 30 people.

Mr. Ridley: My hon. Friend should not mention a garage. A garage might not be exempt to permit payment by instalments under the schedule. It is only land and private company shares on which the tax can be paid in instalments, and a garage or shop is a very bad example because it might not fall into either category.

Mr. Howell: That may be so, but my hon. Friend will see from the following paragraph that there are further definitions. I would join him in being confused, as paragraph after paragraph makes qualifications about what is exempt and what is not, but it may be that businesses, of which a garage can be described as one, are included. I sympathise with him in being unclear about what is and what is not excluded.
The basic issue is, either the Chancellor or the Bill is misleading us. There is no middle way. Either there is a right of election and the Chancellor is right when he says that it is possible for the transferor to hand over the instalments—no mention of additional grossing-up, and Amendment No. 153 would reinforce the points implied so clearly by the Chancellor that no additional tax is attracted—or the Bill, the Financial Secretary and the Chief Secretary are right.
From the point of view of future management of the tax, I hope that the Chancellor is right, but having watched the other two Ministers struggle over the weeks with their briefs trying to understand the Bill, I hope that they do not have to renege on their oft-repeated undertaking that the primary liability is laid upon the donor. One or other must be the position.
I would ask whether it were possible for the Financial Secretary to catch your eye, Mr. Deputy Speaker, to try to explain, with the leave of the House, this matter to us once more to clarify it. This is important. The hon. Member for Llanelli has emphasised, with his great experience and skill in these matters, what confusion exists. If it were possible for

the Financial Secretary to intervene again in the debate, with the leave of the House, that would help matters.

Dr. Gilbert: I was hoping to catch your eye, Mr. Deputy Speaker. With the leave of the House, may I say that I am grateful to the hon. Member for Guildford (Mr. Howell) for his invitation. I shall see what I can do to clear up the difficulties.
First, perhaps I may address myself to one or two of the general points made by the hon. and learned Member for Dover and Deal (Mr. Rees). He suggests that this tax involves a novel principle and that the quantum of tax will vary according to who pays the tax on the same transaction. But they are quite different transactions, depending on who pays the tax. I am glad to see the assent of the right hon. Member for Down, South (Mr. Powell). That is the whole principle of grossing-up.
The hon. Member for Havant and Waterloo (Mr. Lloyd) was not, unfortunately, with us in Standing Committee. We missed his good nature there. Quite understandably, he did not have the advantage—if I may so put it—of our discussions there. He talked about the distinction between the tax on the joint wealth of both parties. The whole purpose of the tax is to distinguish between the wealth of the parties separately. This is a tax on a transfer from one individual to another.
I rather gathered that the hon. Gentleman thought that the whole principle of grossing-up was a totally novel concept in English tax law. I am sure he will be the first to recognise and acknowledge that the principle of grossing-up is provided in relation to estate duty. If someone were to be given something entirely free of estate duty, different consequences would apply if the beneficiary were to be paying the tax. I am grateful for the hon. Gentleman's acknowledgement of that.
I turn to some of the technical difficulties involved here Not for the first time, my hon. Friend the Member for Llanelli (Mr. Davies) has it absolutely right, as I understood him, and he put it much more lucidly than I ever could. But I think that I could go a little beyond what he said. He rightly points


out that under Clause 25(2) the transferor and the transferee are the persons liable. If, however, one looks forward to Clause 27(5), on page 22, one sees that
Where a person is liable for any tax … under subsection (2) of section 25 of this Act otherwise than as transferor
—in other words, if it is the transferee—
he shall be liable only if the tax remains unpaid after it ought to have been paid.
In other words, I had in mind when the tax is overdue—and, as I said earlier, this will normally be six months after the due date or, I should says, six months after the end of the months in which the transfer is made.
I say to the hon. Member for Guildford that when I said that the transferor is primarily liable, I meant that for the first six months until the tax becomes overdue it is the transferor who is liable and then subsequently, after the option of Clause 27(5) comes into effect, they are jointly liable.

Mr. Lawson: The hon. Gentleman does not meet the point. What subsection (5) is concerned about is to protect the transferee from having to pay the tax in certain circumstances. It obviously does not protect the transferor. What we are concerned about is the point that the hon. Member for Llanelli (Mr. Davies) made and the point that I have made in moving the amendment. It is the one point at issue here. How can we be sure in the Bill as it is drafted—I do not believe that we can be sure—that if, after one yearly instalment of the eight is paid by the transferee, there is not immediate recourse by the Revenue to the transferor for the whole of the remainder?

Dr. Gilbert: I think that the hon. Gentleman is on to a different point. I shall try to come to that shortly. We ought to get this absolutely clear. As far as the first six months are concerned, the liability is on the settlor as the result of the operation of Clause 27(5). Subsequently there is the joint liability on the transferor and the transferee under Clause 25(2).
Nothing in the operation of Clause 27(5) excludes, as I understand it, an arrangement whereby the transferee

should pay the tax. It would, therefore be a net gift rather than a grossed-up gift within the first six months. The option is always there as between the transferor and the transferee. As I said in my original remarks, they are already free to decide who is to bear the tax. Clause 25(2) lays down no order of priority. Each of them is liable to the whole tax, but the amount of the tax will depend on who pays it.
6.15 p.m.
I come now to the point raised about instalments. As I understand the situation, if the transferee takes advantage of the instalment provisions under Schedule 4, paragraph 13(5)(a), and pays the first instalment properly and then subsequently, shall we say, it is impossible for the Revenue to collect from him, for whatever reasons, the right to pay by instalment is not affected by that, even though the Revenue's rights revert back to the transferor. But in those circumstances a higher rate of tax would be involved because if the tax was no longer being paid by the transferee the grossing-up effects would apply to that proportion of the tax which was unpaid.
We had a detailed discussion in Committee about how one calculated the grossing-up provisions with regard to the unpaid portion of the tax when the transferee had started paying and then, after a period, it had become impossible for him to pay any longer and the transferor would take up the payments.

Mr. David Howell: I see the point that the hon. Gentleman is trying to make, but it appears to contradict flatly what the Chancellor said in his prepared reply in the Daily Express. He makes no mention of an additional tax being allowable if the transferee starts paying instalments. There is no mention of that. How can it be that both the Chancellor and the Financial Secretary are right? It does not make sense.

Dr. Gilbert: By the leave of the House, I am trying to assist the House. I think I have given an accurate exposition of the matter. The hon. Gentleman has me at a disadvantage. I do not have that newspaper article in front of me. I do not think it is helpful to bandy newspaper articles about at present. I have gone


carefully through the effects of Clauses 25 ad 22 and Schedule 4 and I think that I have made matters clear.

Mr. Lawson: The hon. Gentleman says that if the transferee pays one instalment and then the Revenue cannot collect any more from the transferee because the transferee refuses to pay, the Revenue can go to the transferor. What we are concerned about is the Revenue going to the transferor simply because there is a liability all the time with the transferor even though the transferee may be well content to pay the second instalment in the second year, the third instalment in the third year and so on. There is nothing in the Bill to ensure that the Revenue does not seek the tax from the transferor, because they are both liable.

Dr. Gilbert: Again, there is a possible misunderstanding here. I shall look at the matter again. As I am advised, the situation is quite clear. Quite obviously, in situations of this sort different people may come to different interpretations of any statute, and these things are eventually determined by the courts. However, we should prefer to get the matter clear between us across the Floor of the House this afternoon if possible. My explanation does not, apparently, satisfy hon. Members of the Opposition.
The right to the instalments is enshrined in Schedule 4. That right is available only to the transferee in the first place. Therefore, once it is agreed that the transferee is to be liable and he has begun his payments under Schedule 4, clearly the Revenue will not proceed Against him unless for any reason he is unable to make payments.

Sir Geoffrey Howe: May I ask the Financial Secretary to take this as an illustration of the many unresolved difficulties still existing in this legislation? Listening to this matter for the first time, as it were—although I have attempted to understand the argument before coming to the debate—it is clear that there is here real scope for misunderstanding.
The hon. Member for Llanelli (Mr. Davies) draws attention to the importance of the point. There are many comparable points littered throughout this legislation. It is not sufficient to say, if it is humanly

avoidable, "Well, let that be resolved in the courts by litigation in due course." I am sure that the Financial Secretary appreciates this.
May I have the hon. Gentleman's assurance that in preparing the next Finance Bill, which must now be cooking, he will ensure that attention is given to this and many comparable points? With legislation on a new tax we have no opportunity of putting it right in another place, but we have the opportunity to do so in the next Finance Bill, as the right hon. Member for Down, South (Mr. Powell) pointed out.
I give notice that we intend to deliver to the Chancellor of the Exchequer a well-intentioned and reasonable schedule of all the remaining outstanding points of importance. I hope to receive the Minister's assurance that serious attention will be given to all those points, otherwise many difficulties will arise for the taxpayers.

Dr. Gilbert: I am obliged to the right hon. and learned Gentleman for his constructive intervention. I accept that there are difficulties. I acknowledge straight away that he has come on to the Opposition Front Bench with his present responsibilities in the middle of a Finance Bill. It must be difficult for him. As one who arrived on the Opposition Front Bench in a junior capacity in the middle of a Budget debate three years ago, I know the sort of difficulties that confront him.
I accept that difficulties are present in what is an extremely complex piece of legislation, as all legislation introducing a fundamentally new tax must be. I undertake to consider seriously the memorandum that the right hon. and learned Gentleman proposes to put before my right hon. Friend. I give him that assurance without any reservation.

Mr. David Howell: With the leave of the House, may I say that if there were another stage to the Bill we would accept the Financial Secretary's undertaking to look at the matter again, which is roughly what he is saying. But there is no such further stage. All this confirms that we shall approach the next Finance Bill constructively. The present exchange also confirms our belief—if it


needed confirming—that the Bill is an unholy muddle. Another of the central principles appears to be riddled with ambiguity and shrouded in doubt. I must urge my right hon. and hon. Friends to press Amendment No. 56 in an attempt to get some clarity back into the Bill and to underpin the undertakings of the Chancellor, which appear to need increasing underpinning these days.

Mr. Lawson: If it is possible to have a vote on Amendment No. 56, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed, No. 56 in page 19, line 25, after 'transferee', insert:
'Provided always that the transferor and the transferee or, when appropriate, the personal representatives of either of them, may within two years of the date of a chargeable transfer, jointly state by notice in writing to the Board that one or the other shall be primarily liable, in which event the other shall be discharged from all liability unless and until the one made primarily liable shall fail to pay the tax assessed on him;'.—[Mr. Lawson.]

Question put, That the amendment he made:

The House divided: Ayes 217, Noes 264.

Division No. 132.]
AYES
[6.24 p.m.


Adley, Robert
Fletcher, Alex (Edinburgh N)
Lester, Jim (Beeston)


Aitken, Jonathan
Fookes, Miss Janet
Lloyd, Ian


Alison, Michael
Fowler, Norman (Sutton C'f'd)
Loveridge, John


Amery, Rt Hon Julian
Fox, Marcus
McCrindle, Robert


Atkins, Rt Hon H. (Spelthorne)
Fraser, Rt Hon H. (Stafford &amp; St)
MacGregor, John


Awdry, Daniel
Freud, Clement
Macmillan, Rt Hon M. (Farnham)


Baker, Kenneth
Fry, Peter
McNair-Wilson, M. (Newbury)


Banks, Robert
Gardiner, George (Reigate)
McNair-Wilson, P. (New Forest)


Beith, A. J.
Gardner, Edward (S Fylde)
Madel, David


Bennett, Dr Reginald (Fareham)
Gilmour, Rt Hon Ian (Chesham)
Marshall, Michael (Arundel)


Benyon, W.
Gilmour, Sir John (East Fife)
Marten, Neil


Berry, Hon Anthony
Glyn, Dr Alan
Mates, Michael


Biffen, John
Goodhart, Philip
Mather, Carol


Biggs-Davison, John
Goodhew, Victor
Maude, Angus


Blaker, Peter
Goodlad, Alastair
Mawby, Ray


Bowden, A. (Brighton, Kemptown)
Gorst, John
Maxwell-Hyslop, Robin


Boyson, Dr. Rhodes (Brent)
Gow, Ian (Eastbourne)
Mayhew, Patrick


Brittan, Leon
Griffiths, Eldon
Meyer, Sir Anthony


Brotherton, Michael
Grimond, Rt Hon J.
Miller, Hal (Bromsgrove)


Brown, Sir Edward (Bath)
Grylls, Michael
Mills, Peter


Bryan, Sir Paul
Hall, Sir John
Miscampbell, Norman


Buchanan-Smith, Alick
Hall-Davis, A. G. F.
Mitchell, David (Basingstoke)


Buck, Antony
Hamilton, Michael (Salisbury)
Monro, Hector


Bulmer, Esmond
Hampscn, Dr Keith
Montgomery, Fergus


Burden, F. A.
Harrison, Col Sir Harwood (Eye)
Moore, John (Croydon C)


Carlisle, Mark
Harvie Anderson, Rt Hon Miss
More, Jasper (Ludlow)


Carr, Rt Hon Robert
Hastings, Stephen
Morrison, Charles (Devizes)


Chalker, Mrs Lynda
Hawkins, Paul
Morrison, Hon Peter (Chester)


Churchill, W. S.
Hayhoe, Barney
Mudd, David


Clark, Alan (Plymouth, Sutton)
Hicks, Robert
Neave, Airey


Clark, William (Croydon S)
Higgins, Terence L.
Nelson, Anthony


Clarke, Kenneth (Rushcliffe)
Holland, Philip
Neubert, Michael


Clegg, Walter
Hooson, Emlyn
Newton, Tony


Cockcroft, John
Hordern, Peter
Normanton, Tom


Cooke, Robert (Bristol W)
Howe, Rt Hn Sir Geoffrey
Nott, John


Cope, John
Howell, David (Guildford)
Onslow, Cranley


Cormack, Patrick
Howell, Ralph (North Norfolk)
Osborn, John


Corrie, John
Howells, Geraint (Cardigan)
Page, John (Harrow West)


Costain, A. P.
Hunt, John
Pardoe, John


Crouch, David
Hurd, Douglas
Parkinson, Cecil


Crowder, F. P.
Irving, Charles (Cheltenham)
Pattie, Geoffrey


Davies, Rt Hon J. (Knutsford)
James, David
Penhaligon, David


Dean, Paul (N Somerset)
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Percival, Ian


Dodsworth, Geoffrey
Jessel, Toby
Peyton, Rt Hon John


Douglas-Hamilton, Lord James
Johnson Smith, G. (E. Grinstead)
Prior, Rt Hon James


du Cann, Rt Hon Edward
Jones, Arthur (Daventry)
Raison, Timothy


Durant, Tony
Kaberry, Sir Donald
Rees, Peter (Dover &amp; Deal)


Dykes, Hugh
Kellett-Bowman, Mrs Elaine
Rees-Davies, W. R.


Eden, Rt Hon Sir John
Kershaw, Anthony
Renton, Rt Hon Sir D. (Hunts)


Edwards, Nicholas (Pembroke)
Kimball, Marcus
Renton, Tim (Mid-Sussex)


Elliott, Sir William
King, Tom (Bridgwater)
Rhys Williams, Sir Brandon


Emery, Peter
Kirk, Peter
Ridley, Hon Nicholas


Eyre, Reginald
Knight, Mrs Jill
Ridsdale, Julian


Fairbairn, Nicholas
Lamont, Norman
Rifkind, Malcolm


Fairgrieve, Russell
Lane, David
Roberts, Wyn (Conway)


Farr, John
Latham, Michael (Melton)
Rossi, Hugh (Hornsey)


Fell, Anthony
Lawrence, Ivan
Rost, Peter (SE Derbyshire)


Finsberg, Geoffrey
Lawson, Nigel
Shaw, Giles (Pudsey)


Fisher, Sir Nigel
Le Merchant, Spencer
Shaw, Michael (Scarborough)




Shelton, William (Streatham)
Steel, David (Roxburgh)
Walker, Rt Hon P. (Worcester)


Shepherd, Colin
Steen, Anthony (Wavertree)
Walker-Smith, Rt Hon Sir Derek


Shetsby, Michael
Stewart, Ian (Hitchin)
Walters, Dennis


Silvester, Fred
Stokes, John
Weatherill, Bernard


Sims, Roger
Stradling Thomas, J.
Wells, John


Skeel, T. H. H.
Taylor, R. (Croydon NW)
Wlggin, Jerry


Smith, Dudley (Warwick)
Tebbit, Norman
Winterton, Nicholas


Speed, Keith
Temple-Morris, Peter
Wood, Rt Hon Richard


Spence, John
Thatcher, Rt Hon Margaret
Young, Sir G. (Ealing, Acton)


Spicer, Jim (W Dorset)
Townsend, Cyril D.
Younger, Hon George


Spicer, Michael (S Worcester)
Tugendhat, Christopher



Sproat, Iain
van Straubenzee, W. R.
TELLERS FOR THE AYES:


Stainton, Keith
Vaughan, Dr. Gerard
Mr. Adam Butler and


Stanbrook, Ivor
Viggers, Peter
Mr. Richard Luce.


Stanley, John
Wakeham, John





NOES


Abse, Leo
Dunnett, Jack
Kelley, Richard


Allaun, Frank
Dunwoody, Mrs Gwyneth
Kerr, Russell


Anderson, Donald
Eadie, Alex
Kilroy-Silk, Robert


Archer, Peter
Edelman, Maurice
Kinnock, Neil


Armstrong, Ernest
Edge, Geoff
Lambie, David


Ashley, Jack
Edwards, Robert (Wolv SE)
Lamborn, Harry


Ashton, Joe
Ellis, John (Brigg &amp; Scun)
Lamond, James


Atkins, Ronald (Preston N)
Ellis, Tom (Wrexham)
Leadbitter, Ted


Bagier, Gordon A. T.
English, Michael
Lever, Rt Hon Harold


Bain, Mrs Margaret
Ennals, David
Lewis, Ron (Carlisle)


Baker, Kenneth
Evans, Gwynfor (Carmarthen)
Litterick, Tom


Barnett, Guy (Greenwich)
Evans, Ioan (Aberdare)
Loyden, Eddie


Barnett, Rt Hon Joel (Heywood)
Evans, John (Newton)
Luard, Evan


Bates, Alf
Ewing, Harry (Stirling)
Lyon, Alexander (York)


Bean, R. E.
Fernyhough, Rt Hon E.
Lyons, Edward (Bradford W)


Benn, Rt Hon Anthony Wedgwood
Fitt, Gerard (Belfast W)
McCartney, Hugh


Bennett, Andrew (Stockport N)
Flannery, Martin
MacCormick, Iain


Bidwell, Sydney
Fletcher, Ted (Darlington)
McGuire, Michael (Ince)


Blenkinsop, Arthur
Foot, Rt Hon Michael
Mackintosh, John P.


Boardman, H.
Ford, Ben
Maclennan, Robert


Booth, Albert
Forrester, John
McMillan, Tom (Glasgow C)


Boothroyd, Miss Betty
Fowler, Gerald (The Wrekin)
McNamara, Kevin


Bottomley, Rt Hon Arthur
Fraser, John (Lambeth, N'w'd)
Madden, Max


Boyden, James (Bish Auck)
Garrett, John (Norwich S)
Magee, Bryan


Bradley, Tom
Garrett, W. E. (Wallsend)
Mahon, Simon


Bray, Dr Jeremy
Gilbert, Dr John
Marks, Kenneth


Brown, Hugh D. (Provan)
Ginsburg, David
Marquand, David


Brown, Robert C. (Newcastle W)
Golding, John
Marshall, Dr Edmund (Goole)


Buchan, Norman
Gould, Bryan
Marshall, Jim (Leicester S)


Butler, Mrs Joyce (Wood Green)
Gourlay, Harry
Mason, Rt Hon Roy


Callaghan, Jim (Middleton &amp; P)
Graham, Ted
Meacher, Michael


Campbell, Ian
Grocott, Bruce
Mellish, Rt Hon Robert


Canavan, Dennis




Cant, R. B.
Hamilton, James (Bothwell)
Mikardo, Ian


Cnrmichael, Neil
Hamilton, W. W. (Central Fife)
Miller, Dr M. S. (E Kilbride)


Carter, Ray
Hardy, Peter
Miller, Mrs Millie (Ilford N)


Carter-Jones, Lewis
Harper, Joseph
Mitchell, R. C. (Soton, Itchen)


Castle, Rt Hon Barbara
Harrison, Walter (Wakefield)
Molloy, William


Clemitson, Ivor
Hattersley, Rt Hon Roy
Moonman, Eric


Cocks, Michael (Bristol S)
Hatton, Frank
Morris, Alfred (Wythenshawe)


Cohen, Stanley
Hayman, Mrs Helene
Mulley, Rt Hon Frederick


Colquhoun, Mrs Maureen
Healey, Rt Hon Denis
Murray, Rt Hon Ronald King


Cook, Robin F. (Edin C)
Heffer, Eric S.
Newens, Stanley


Corbett, Robin
Henderson, Douglas
Noble, Mike


Cox, Thomas (Tooting)
Hooley, Frank
Oakes, Gordon


Craigen, J. M. (Maryhill)
Horam, John
Ogden, Eric


Crawford, Douglas
Howell, Denis (B'ham, Sm H)
O'Halloran, Michael


Crosland, Rt Hon Anthony
Hoyle, Doug (Nelson)
O'Malley, Rt Hon Brian


Cryer, Bob
Huckfield, Les
Orbach, Maurice


Cunningham, G. (Islington S)
Hughes, Rt Hon C. (Anglesey)
Owen, Dr David


Dalyell, Tam
Hughes, Mark (Durham)
Padley, Walter


Davidson, Arthur
Hughes, Robert (Aberdeen N)
Palmer, Arthur


Davies, Bryan (Enfield N)
Hughes, Roy (Newport)
Park, George


Davies, Denzil (Llanelli)
Hunter, Adam
Parker, John


Davies, Ifor (Gower)
Irving, Rt Hon S. (Dartford)
Parry, Robert


Davis, Clinton (Hackney C)
Jackson, Colin (Brighouse)
Perry, Ernest


Deakins, Eric
Jackson, Miss Margaret (Lincoln)
Prentice, Rt Hon Reg


Dean, Joseph (Leeds West)
Janner, Greville
Price, William (Rugby)


de Freitas, Rt Hon Sir Geoffrey
Jay, Rt Hon Douglas
Radice, Giles


Dell, Rt Hon Edmund
Jeger, Mrs Lena
Reid, George


Dsmpsey, James
Jenkins, Hugh (Putney)
Richardson, Miss Jo


Doig, Peter
Jenkins, Rt Hon Roy (Stechford)
Roberts, Albert (Normanton)


Dormand, J. D.
Johnson, James (Hull West)
Roberts, Gwilym (Cannock)


Douglas-Mann, Bruce
Johnson, Walter (Derby S)
Robertson, John (Paisley)


Duffy, A. E. P.
Jones, Dan (Burnley)
Roderick, Caerwyn


Dunn, James A.
Kaufman, Gerald
Rodgers, George (Chorley)







Rodgers, William (Stockton)
Stewart, Donald (Western Isles)
Watkinson, John


Rooker, J. W.
Stoddart, David
Watt, Hamish


Roper, John
Stott, Roger
Weitzman, David


Rose, Paul B.
Strang, Gavin
Wellbeloved, James


Ross, Rt Hon W. (Kilmarnock)
Strauss, Rt Hon G. R.
Welsh, Andrew


Ryman, John
Summerskill, Hon Dr Shirley
White, Frank R. (Bury)


Sandelson, Neville
Taylor, Mrs Ann (Bolton W)
White, James (Pollok)


Sedgemore, Brian
Thomas, Dafydd (Merioneth)
Whitehead, Phillip


Selby, Harry
Thomas, Jeffrey (Abertillery)
Whitlock, William


Shaw, Arnold (Ilford South)
Thomas, Mike (Newcastle E)
Willey, Rt Hon Frederick


Sheldon, Robert (Ashlon-u-Lyne)
Thomas, Ron (Bristol NW)
Williams, Alan Lee (Hornch'ch)


Shore, Rt Hon Peter
Thompson, George
Williams, Rt Hon Shirley (Hertford)


Short, Rt Hon E. (Newcastle C)
Thorne, Stan (Preston South)
Williams, W. T. (Warrington)


Short, Mrs Renée (Wolv NE)
Tierney, Sydney
Wilson, Gordon (Dundee E)


Silkin, Rt Hon John (Deptford)
Tinn, James
Wilson, Rl Hon H. (Huyton)


Silkin, Rt Hon S. C. (Dulwich)
Tomtinson, John
Wilson, William (Coventry SE)


Sillars, James
Torney, Tom
Wise, Mrs Audrey


Silverman, Julius
Varley, Rt Hon Eric G.
Woodall, Alec


Skinner, Dennis
Wainwright, Edwin (Dearne V)
Wrigglesworth, Ian


Small, William
Walden, Brian (B'ham, L'dyw'd)
Young, David (Bolton E)


Smith, John (N Lanarkshire)
Walker, Harold (Doncaster)



Snape, Peler
Walker, Terry (Kingswood)
TELLERS FOR THE NOES:


Spearing, Nigel
Ward, Michael
Mr. Laurie Pavitt and


Springs, Leslie
Watkins, David
Mr. Tom Pendry.


Stallard, A. W.

Question accordingly negatived.

Amendments made: No. 57, in page 19, line 44, at end insert—
'(3A) Where the chargeable transfer is made within three years of the transferor's death, then, with respect to so much of the tax, as exceeds what it would have been had the transferor died more than three years after the transfer, subsection (2)(a) above shall have effect with the omission of the words "the transferor and" and subsection (3) above with the omission of paragraph (d),'.

No. 58, in page 21, line 1, leave out second 'a' and insert 'another'.

No. 59, in page 21, line 2, leave out '26th' and insert '27th'.

No. 61, in page 21, line 3, leave out 'the transfer' and insert 'both transfers'

No. 62, in page 21, line 5, at end insert 'other'.—[Dr. Gilbert.]

Clause 26

EXCEPTIONS FROM LIABILITY

Amendments made: No. 64, in page 21, line 20, leave out section 30(3) or'.

No. 66, in page 21, line 21, after '32' insert—
'or subsection (3) or (4) of section (conditional exemption for certain buildings, etc. on death)'.

No. 67, in page 21, line 21, after 'Act', insert—
'or in the case of tax payable on the proceeds of a sale in accordance with paragraph 3(a) of Schedule (Relief for woodlands) to this Act, the person liable under paragraph 2(2) of that Schedule'.

No. 497, in page 21, line 22, at end insert—
'and no person other than those liable under subsection (3) of section 37 of this Act shall be liable for any tax chargeable under subsection (1) of that section'.

No. 796, in page 21, line 22, at end insert—
'(2A) Where a transfer of value is made within one year of the death of the transferor and, by reason of an excess over the amount specified in paragraph 9(1)(b) or 9A(1)(b) of Schedule 6 to this Act, any tax is chargeable on a part of the value transferred which is attributable to property given to a charity or property which becomes the property of a political party, no person other than the charity or, as the case may he, the political party shall be liable for tax on that part'.—[Dr. Gilbert.]

Clause 27

LIMITATION OF LIABILITY

Amendments made: No. 69, in page 22, line 12, at end insert—
'(3A) Where the tax exceeds what it would have been had the transferor died more than three years after the transfer, a person shall not be liable for the excess as a person in whom property is vested otherwise than beneficially, except to the extent of so much of the property as is vested in him at the time of the death; and a person shall not be liable for the excess as a trustee in relation to any property, except to the extent of—

(a) so much of the property as is vested in him at the time of the death; and
(b) so much of the property as, after the death, he has actually received or disposed of or as, after the death, he has become liable to account for to the persons beneficially entitled thereto'.

No. 70, in page 22, line 27, at end insert—
'(6) Subsection (5) above shall not apply in relation to such an excess as is mentioned in subsection (3A) above',—[Dr. Gilbert.]

Clause 28

BURDEN OF TAX

Amendment made: No. 71, in page 23, line 28, at end insert—
'(8) References in this section to tax include interest on tax and, in subsections (1) to (5), costs properly incurred in respect of it'.—[Dr. Gilbert.]

Clause 35

RATE OF TAX

Amendment made: No. 76, in page 26, line 44, after 'the', insert 'appropriate'.—[Dr. Gilbert.]


Dr. Gilbert: I beg to move Amendment No. 77, in page 27, line 6, at end insert—


'(1A) Except as otherwise provided the First Table set out in subsection (2) below is the appropriate Table for a transfer made on or at any time within three years of the death of the transferor, and the Second Table set out in that subsection is the appropriate Table for any other transfer'.

Mr. Speaker: With it we shall discuss the following amendments to the amendment: (b), in line 2, leave out 'three years' and insert 'one year'.

(c), in line 4, at end add:
'Provided that only the second table shall apply for a transfer made in respect of shares in an unquoted company, a partnership or the assets of a sole trader'.

(d), in line 4, at end add:
'Provided that only the second table shall apply for a transfer made in respect of shares in a close trading company or assets used in a trade, profession or vocation'.

(e) in line, at end insert—
'Provided that in relation to transfers of shares in a close company or of assets of a

'Portion of Value
Rate of Tax


Lower Limit
Upper Limit
Per Cent.


0
30,000
Nil


30,000
40,000
5


40,000
50,000
7½


50,000
60,000
10


60,000
80,000
15


80,000
100,000
17½


100,000
125,000
20


125,000
150,000
30


150,000
250,000
40


250,000
500,000
50


500,000
1,000,000
65


1,000,000
2,000,000
70


2,000,000

80.'

Clause 30

REDUCED RATES FOR TAXABLE GIFTS TO CHARITIES

Amendment made: No. 72, in page 23, line 33, leave out Clause 30.—[Mr. Joel Barnett.]

trade or profession where the assets transferred do not exceed £250,000 in value and where the transferee has been engaged in full-time employment in the company or partnership for not less than five years and the transferor has been engaged full time or as a director for not less than three years before the transfer and if the transferee continues in full-time employment in the business for the three succeeding years after the transfer then the rate of tax shall be one-half that in the second table, only'.

We shall also discuss Government Amendments Nos. 78, 79 and 81 and the following Opposition amendments:

No. 439, in page 27, leave out lines 12 to 30 and insert:

No. 80, in page 27, leave out lines 13 to 30 and add:


'Slice of Chargeable transfers—£000
Rate on slice %


0–15
-


15–20
5


20–25
7½


25–30
10


30–40
12½


40–50
15


50–60
17½


60–80
20


80–100
22½


100–120
27½


120–150
35


150–200
42½


200–250
50


250–300
55


300–500
60


500–1,000
65


1,000–2,000
70


2,000+
75'.

Dr. Gilbert: Amendment No. 77 and the other Government amendments introduce into the clause a reduced scale of rates for lifetime transfers. If I have the opportunity to catch your eye at the end of the debate, Mr. Speaker, it might be for the convenience of the House if I save my remarks until then.

Sir Geoffrey Howe: The pace at which we are moving indicates the constraints under which we are operating. We have now reached the point at which we have an opportunity to consider the quite monstrous and unjustifiable rates at which this ill-designed tax will continue to operate even after the concession contained in Amendment No. 77.
It is important to bring home to all hon. Members and to people outside this House the grave damage which will be inflicted by the tax on firms and farms, families and thrift. It appears—I say this advisedly—that even now the Government Front Bench has no comprehension of the scale and nature of the damage it is doing through its tax proposals. I return to the question which has baffled me ever since I began studying these proposals in detail: whether it is more serious to conclude that Ministers know and understand what they are doing and are, therefore, guilty of wilful destruction than it is to conclude that they still do not know and do not understand what they are doing and, therefore, should be subject to a verdict of not guilty by virtue of insanity.
I shall give an example which could apply to many different industries, companies

and firms. It affects the building industry. Small firms are dominant as they are in the garage trade, in which there are many small garage businesses. There is also the farming industry, and in that context perhaps I should mention egg farming, many representatives of which are currently in the precincts of the House seeking to speak to hon. Members. Those of us who are taking part in the debate may not be able to see our egg farmers in person as they would wish, but I hope they will feel that we are fighting their battle for them in representing their case against the tax.
Perhaps I may quote the example of a farm worth, say, £100,000—a business which has been built up to that value over 25 years. That is by no means a high valuation in terms of small businesses or companies engaged in any of the activites to which I have referred.
It is, therefore, not an unreasonable example. Let me analyse step by step the effects of the Government's proposals on such an undertaking.
Let us suppose that a firm of that kind is being disposed of either by death or by gift to another member of the family to whom it is to be passed on. If we understand the Government's intention correctly, there will be payable, first, capital gains tax at the rate of 30 per cent. Under the amendment we are now considering, capital transfer tax will also be payable at a rate, now reduced in the case of a lifetime interest, of 50 per cent. on death. Let it be noted that if the tax is to be paid by the transferor or donor, the grossing-up provision applies and it is assessed on £150,000.

Mr. David Howell: Scandalous!

Sir G. Howe: It is indeed scandalous. The scale of the scandal is set out in the answers to which we have referred, which cannot be studied too often and which appear at cols. 573 and 574 et seq. of the Official Report of 21st February, that were given to my hon. Friend the Member for Blaby (Mr. Lawson).
If one contemplates the position shown there under Table 1, which sets out the capital transfer tax and capital gains tax combined as a proportion of the assets transferred on a £100,000 business, one sees the quite astonishing figure of


£106,000, rounded up by a pound or two. On that footing, therefore, the tax payable is in excess of the actual value of the business being transferred. Of course, a substantial element in that sum is represented by capital gains tax, but only by that tax payable on the growth in the cash value of a firm as a result of an assumed rate of inflation of 10 per cent. over 25 years. On that footing one has the absolutely ludicrous situation of tax being exacted in excess of the value of the assets in question. It can only be described as expropriation, as robbery without violence. That is only one of the ways in which one can approach it.
If one looks at the more generous Table 2 proposals, now the subject of an amendment moved by the Financial Secretary, in the case of somebody transferring as a gift during lifetime one sees that the rate of capital transfer tax is reduced. Even so, for a business of that kind worth £100,000 the cumulative tax payable, as set out in Table 3 of the answers given to my hon. Friend—£52,000—represents more than one-half of the value of the business in question. I have some questions to ask on that later. How far do the thousands of small business men up and down the country, in spite of all the letters we have been receiving from them, even now appreciate what is meant by that?
To take another example, that of a business worth £250,000, again under Table 3, the cumulative addition of capital gains tax and capital transfer tax, even on the reduced rate for lifetime transfers, makes the combined tax payable, on the assumptions I have indicated, more than £300,000. If one had not studied these things closely one would not believe one's eyes, one's ears or anything else. It is a wholly fantastic situation and I do not understand how any explanation or exposition from the Government can begin to justify such things.
Let us look again at the way the Chancellor, in the less-than-candid series of answers he gave in the Daily Express, described the situation of which I have just been speaking, which I hope you will remember, Mr. Speaker—a combined rate of more than £300,000 in capital gains tax and capital transfer

tax on a business of £250,000. The Chancellor was asked:
The Confederation of British Industry has said that the tax will damage small firms and therefore employment. How do you answer this charge?
The Chancellor answered:
I do not accept that the tax will have this effect, particularly now that we have reduced the rate on small- and medium-sized gifts. … On a gift of £250,000 the lifetime tax will be about two-thirds of the tax on death. We have introduced this relief to help small businesses in particular.
Some help! It is absolutely lunatic. One thing that has been made clear by the amendment that the Financial Secretary has just moved is that the original lifetime rates proposed in the Bill as introduced in this House were far too high. The amendment which the hon. Gentleman is seeking to move is not just an admission of error, an admission that goes nowhere near far enough. It is a confession of gross folly, and it is a pity that the standard by which we have had to judge it is the standard underlying this whole legislation.
6.45 p.m.
The Government still do not go and have not gone anything like far enough. They have not brought their proposals within 1,000 miles of sanity or justice. Be it noted that the schedule now introduced by the Financial Secretary applies only to lifetime gifts, and then only if the transference between donor and donee is made more than three years before death. The point of Amendment (b) is to reduce the period to make it comparable to that provided for charities, a period of 12 months. Even so, the exemption that the Government are seeking on relief provided in Table 2 is a first step.
Let us hope that we shall not in any subsequent discussion hear that referred to as a loophole. I would not put it beyond the rather ghoulish characters who have been occupying the Government Front Bench throughout these debates to begin suggesting, in a way suggested earlier but rather differently by my hon. Friend, that in face of this burden of taxation life itself should be regarded as a loophole which ought shortly to be stopped up. That argument would not surprise me. It would not


surprise me if the more benevolent proposals of the second table were merely paving the way for the hon. Member for Bolsover (Mr. Skinner) when he finally succeeds to the distinguished position of the Financial Secretary, or even, God forbid, something more distinguished, to stop up even these loopholes.
Seriously, how is a family business expected to cope? I ask that in a genuine spirit of inquiry. On transferring a business worth £100,000, how does one find £106,000 of tax, even if the cost of doing so is at the new lifetime gift rate? How does one find £52,000 to pay the tax? How does one set about it? These are questions that I am being asked in letter after letter from all over the country. What is the intention in imposing this extraordinary and destructive burden on such businesses?
Amendments (c), (d) and (e), standing in the names of my right hon. Friends and myself, would offer some relief from that burden though probably still nothing like enough; but they are an attempt to improve the horrors that confront us. Of course it is true that similar problems could have arisen when we were facing only estate duty but—let the Financial Secretary hold his peace—they seldom did because of the existence, under provisions carefully worked out by advisers of the calibre of the Chief Secretary, who is not now with us, of trusts and other arrangements.
By those means businesses and farms were able to pass from one generation of a family to the next and to survive and prosper. By those means businesses and farms grew, prospered and created jobs and wealth for people in the communities in which they lived, creating wealth of all kinds for the community. That desirable effect, apparently, is said to be a loophole. It is the survival kit within the pattern of estate duty that is to be snatched from small farms and businesses and others, since it is identified as a loophole.
It is uncomprehending rubbish for that to be described as a loophole. The existence of continued capacity to make arrangements of that kind is the result of conscious decisions of successive Chancellors in face of the nature of estate duty to allow successful enterprise of that

kind to continue to exist. It is wholly destructive to seek to stop up that so-called loophole.
Now that that is intended, I ask again not merely how business men, businesses and farmers are intended to cope, but what is the purpose of the change projected by the Government in relation to those businesses? What will be its effect? I can see only one way in which the situation can be met. The effect is bound to be to compel the sale in whole or in part of thousands of successful, thriving enterprises. One asks, sold to whom? They will be sold to giant public corporations if they, in face of the Government's other economic policies, can raise the cash to make the purchase, which is doubtful. They will be sold to the chiefs of satrapies in the Middle East or elsewhere, if they still have the courage to invest in the kind of Britain which will survive the imposition of that tax, or they will be sold, as it was suggested last night, by compulsion to the right hon. Member for Bristol, South-East (Mr. Benn), the ignoble Lord Stansgate. There can be no other consequence.
I have nowhere seen any attempt to answer the question I ask about what will be the effect. What other way, therefore, is to be seen? In what sense is it any exaggeration to say that enterprises will be destroyed within a generation and that workers in those enterprises and their jobs will be taken over and threatened? As sane men are presumed to intend the consequences of their acts, one can only conclude that the Labour Government mean to achieve just that desolation which lies in prospect. It is unbelievable.
I wish to give time for my hon. Friends to join in this extremely important debate, but I hope I may be forgiven for recounting to the House a conversation I had a year or two ago with a distinguished representative of the Chinese People's Republic. Finding myself short of immediate material for launching the conversation, I asked him to what extent dogs were in evidence in the Chinese People's Republic. I was told—perhaps not surprisingly—that there were only worker dogs to be found in that happy country. Dogs were found on farms, with jobs to do, but nowhere else. I asked what happened if such a worker dog strayed out of its agricultural compound and into the town. I received the crisp


reply "Such a dog would not exist." Will someone please explain to the House why these taxes will not work in just that way? What is to be the future of small business in Britain? Within one generation of the Government's carrying through this legislation such a thing will not exist.
Is it any wonder that there are cars on the roads of this country displaying on the back window a sticker which will be the epitaph of the present administration, if they last that long, and which, if we are not careful, may turn out to be the epitaph of Britain. The legend is simple:
Will the last small business man to leave Britain please turn out the lights?
That is the prospect before many people in face of the Government's policies. We are determined, as we have been throughout the proceedings on the Bill, to do everything possible to protect people from that damage, and my right hon. Friend the Leader of the Opposition has already told the House of the Conservative Party's attitude towards this tax. It is a bad tax. I renew, on the Conservative Party's behalf, the pledge already given. We shall, therefore, repeal the tax. We shall take account of the fact that capital taxation in one form or another has existed since the latter part of the last century, but that which will replace the tax will bear in mind, as it should, first the weight of other capital and income taxes on the taxpayer, secondly the beneficial treatment of gifts to the family in other countries which have a gift tax, and thirdly the need to keep in this country those who can create the new wealth upon which our future depends.

Mr. David Mitchell: I wish to refer Amendments (c), (d) and (e) to the Amendment. Amendment (c) refers to unquoted companies. Amendment (d) may, perhaps, appeal to the Financial Secretary because it includes a reference to trading close companies and may close a conceivable loophole. Amendment (e) puts on a limitation of £250,000 and provides that the recipient shall work for five full years before the transfer, the donor shall have been in the business for three years and the recipient shall continue to work in the business.
In Amendment (e) we deal specifically with the family business, the sort of business which passes on from generation to generation and is in many parts of the country the backbone of the local economy, particularly in the regions, including Scotland, Wales and Northern Ireland, where family businesses dominate in the economy.
Amendment No. 77 is in response to the debate in Committee of the whole House. We are grateful that there is to be some help, but regret that it is totally inadequate. The House may recall the definition of "gratitude in politics" made by Lord Boyd-Carpenter, who said that it was "a lively anticipation of further benefits to come". I trust that the Financial Secretary will act in that way tonight.
In the debate in Committee of the whole House, the Chief Secretary said that he could not accept an amendment which treated one group of assets differently from other assets. His words were that:
it would be unfair, all other things being equal, for one taxpayer to pay considerably less than another. That would not be right."—[Official Report, 22nd January 1975; Vol. 884, c. 1662.]
On that basis he rejected our amendment.
Having set out that basis the Chief Secretary proceeded to shoot it to pieces in Standing Committee when he gave preferential treatment to certain deserving groups—in agriculture, with the 20-year valuation, and in forestry, where no payment is made till the asset is sold. That is a principle which is incorporated in Amendment (e), which might be favourably received by the Financial Secretary.
7.0 p.m.
It works on the same principle. A business is like a tree. It takes years to grow, but can be cut down overnight. One of the major problems which small businesses will face in the next few years is the situation that will follow the Government decision to cut down family businesses, small businesses and growing businesses—concerns which have taken years, sometimes generations, to build but which could be quickly destroyed.
Last night we had a brief debate, lasting 20 minutes before midnight, on the


subject of small businesses. The Financial Secretary revealed the Government's defence. He said, if I may paraphrase his words, "What is the fuss all about? These businesses have survived estate duty, and capital transfer tax is at a lower rate than death duty. Since we are conferring a benefit on those businesses, why are the Opposition getting so worked up?" The Minister knows that most people did not pay estate duty. It was paid by those who were unlucky or ill-advised. Certainly many of those in small and medium-sized businesses did not pay estate duty. Because they were not prepared to see their life's work end up as a donation to the Treasury they sought advice on how to avoid it.
The Financial Secretary does not need to attack my argument—I am aware that he will try to do so—since he will find that in his speeches and in the remarks of his right hon. Friend the Chancellor in introducing capital transfer tax it was said that it was necessary to take this action to stop up the holes in estate duty. In other words, it was admitted that very large numbers of firms and people did not come within the scope of estate duty and used legitimate means to avoid the tax. Therefore, the whole of the Minister's defence is founded on sand. Since the majority of businesses did not pay duty it is not true to say that the CTT is less onerous than was the estate duty.
Yesterday at lunchtime I was with a man who was the third generation in a family business. It is not untypical of the sort of business we are dealing with in this debate. It provides jobs for 150 people. It is run by a go-ahead young man who has been trained for the job. Ever since he went to school he knew that one day he would go into the business and would try to build another storey on to the business which had been built up by his father and grandfather. He told me that he had introduced a system of worker participation—indeed, he had a meeting yesterday to consider how to extend that system. He was determined to see that the business forged ahead with the most modern concepts of management and that he would disprove the legend of clogs to clogs in three generations. What situation would now face that business if it had had to

pay capital transfer tax when the young man got his hands on the levers of management?

Mr. Cormack: He could not have afforded the clogs.

Mr. Mitchell: I agree that he could not have afforded them.
Assuming that the business is worth £120,000, as a lifetime gift the tax would amount to £19,000, plus capital gains tax. If we ignore capital gains tax—and we cannot ignore it—we must envisage the person concerned paying £2,400 a year over a period of eight years. The salary of the man in question is about £6,000 a year. How can anybody, on such a salary gross, find £2,400 a year net, for eight years with which to pay the tax?
Let us consider the position of a larger company worth £250,000. In that case the capital gains tax liability could be £37,000 or more. If paid by the recipient on a lifetime gift, if we take the best possible option, the CTT liability would be £76,000. Over eight years the figure would amount to £13,000 a year. To obtain £13,000 a year a man would need a salary, before income tax and higher rate tax, of about £40,000—that is, assuming he has no money to live on. Even the Financial Secretary would admit that a person would have to keep himself, pay his mortgage and so on. Therefore, if he is to have just as much money as a moonlighting plasterer he would need to have £50,000 a year to pay the tax and to be able to live at a modest rate.
Where is the money to come from? We should repeat that question time and again. The Government seem to assume that a young man in this situation is born with a silver spoon in his mouth and has a small fortune behind him. But that is not the situation. Most of the people concerned are young men coming into business who have not a bean to their name, apart from what they earn from the business. How can one take £50,000 a year out of a business worth £250,000 for eight years to pay the tax? It is just not on the cards, and the Financial Secretary knows it. If he wishes to disprove my figures, I shall be happy to allow him to do so.
I have an interest in this matter, as do many of my hon. Friends, and countless people have written to me and my colleagues on this topic. The import of those letters is "There is no possible prospect of my business going on for another generation. Why sweat it out? Why work at it? What is it all worth? "John Chown, in a brilliant analysis in the Financial Times at the beginning of the week, showed what a small amount those working to build up a business can ever hope to pass on.

Dr. Gilbert: I am sure the hon. Gentleman will recall that in the course of that article by the distinguished commentator, Mr. Chown, it was made clear that there should be little difficulty for businesses up to a value of £250,000 in paying the tax.

Mr. Mitchell: I hear what the Minister says, and I shall be interested to hear him describe how somebody can take enough money out of a business—bearing in mind that that person must pay income tax on the money he takes out—to pay CTT and to meet the capital gains tax liability. In the most favourable circumstances in respect of a lifetime gift involving a £250,000 business, he will be required to earn about £50,000 a year. If the Minister wishes to dispute that figure I shall be delighted to give way to him. I invite him, and indeed challenge him, to do so in his reply.

Mr. Esmond Bulmer: Will he also include recognition of what will happen to a business over a period of eight years with inflation running at 20 per cent. per year? How much money will be needed to keep the business going? Will he also stress the difficulty in borrowing the money, and finding where it is to come from?

Mr. Mitchell: My hon. Friend is right. Inflation means that one needs more money to undertake the same volume of business. We must consider this matter against the background not only of CTT but of other taxes—income tax, corporation tax, advance corporation tax, capital gains tax and the promised wealth tax. If one envisages the impact of only half those taxes one sees how impossible is the situation.
One has only to consult those in industry to see what is happening. I do not know how greatly the Financial Secretary and the Government have consulted with the Small Businesses Association, the Small Firms Council of the CBI, the National Chamber of Trade, and the like. I have been conducting a careful analysis with those bodies.
Earlier this week I received a deputation of people involved in running these businesses. They told me what they are doing or planning to do. The Financial Secretary wants a growing and strong economy. The Government have said that that is their aim. However, the Financial Secretary should realise exactly what is happening. I was told: "We have spent our lifetime building up the business and ploughing back. That is the way in which a small business exists. We have put our lives into our business. Now we have to run it down, for otherwise it cannot pass on to the next generation."
I was also told "We have built up a major export business. We have been encouraged by the Government to do it. We put our backs into it and we have been proud of it. Now we have to seek to turn orders away, to wind our business down to make it small enough to be able to pass on."
A third person said: "At my board meeting last Friday we solemnly sat down and discussed ways in which to reduce our business, to reduce our turnover and to reduce our investment programme, and, unfortunately, to reduce our work force."
That is not my invention. There were 40 representatives from different parts of the country at that meeting, every one of whom would confirm the accuracy of what I have said.
Since this Government came to office, a new phrase has appeared—the terminal business. We have heard of terminal wards in hospitals but now we have a terminal section of the business community, comprising those who know that they cannot pass their business on to the next generation and those who do not see any motivation to go on working to build up a business for the benefit of the Chancellor of the Exchequer.
Such people see that there is no prospect either for themselves or, desperately


unfortunately, for their employees, those who have joined the team, who have helped to build up and run the business. From my personal experience I know of the importance in a business of the team and the team spirit which makes it a success. Those people will say to themselves "How can we tie our careers to a terminal business?" They know that if they start such a job at 25 or 30 and the boss dies they will be out of a job in 10 or 20 years' time. Such people will not put themselves into that position.
We now have a serious situation about which the Government do not care and—looking at the empty Government benches—Government supporters do not care a damn, either. We shall have a situation in which the Government will terminate many businesses which provide much employment and the Government do not appear to care.

7.15 p.m.

Mr. John Loveridge: The House knows of my own interests as a small business man.
Any concession is gratefully received by the business community, which is threatened so gravely by the new measures. My advisers tell me that if my wife and I died it might be virtually impossible for the business, in which we have worked so hard for so long, to survive, without reliefs other than those already proffered. It is not nice to hear that. It is dangerous threat to a useful part of the community, and to businesses which are of benefit to the economy.
There should be upper limits on the total capital taxation which can fall on any business. When a business grows it sometimes acquires substantial property assets. In these new circumstances those assets are a threat to the life of the business. However, there are many businesses with limited turnover that cannot survive without substantial property in which the work is done. Such businesses are at greater risk of destruction than those where there is substantial output in relation to the total property assets. That aspect deserves to be separately looked at and given further consideration.
How are the burdens of debt to be met? Insurance would cost far too much. The proprietor of any business of substance

would not be able to afford the premiums, especially if the life assurance policy were taken out in middle age or later. I know that an opportunity is given to pay over eight years. However, most progressive businesses which are in a continuing phase of expansion require all the capital that they can find for investment. If that investment is taken out of the business and used to pay the debt for such taxation, it will be necessary to borrow money or to sell part of the business. That is nothing but destructive.
In any case how will that money be readily raised? What bank would advance money on any substantial scale in circumstances where the business must either be run down or at least not expanded? We know from common experience that a business either grows and prospers or shrinks and goes downhill.
In spite of the natural instinct of business men to make their businesses grow and expand, since the new tax was proposed, I have heard of cases where family firms were planning to reduce the size of their businesses, contrary to the national interest and to natural instincts. They see no other way of being able to pay the tax involved. The Minister has observed that it will be possible for smaller businesses to pay the tax. However, as soon as a business has reached a substantial size it is for the chopper!
Is that desirable? Why should a private family business suffer if it has assets or, say, £1 million, if the people working in it are happy and are doing a good job, and if the service it provides is excellent? Why wield this extraordinary tax to destroy the spirit of enterprise which has made our nation so great? Why destroy the profits on which the Government must draw if we are to pay for social services, defence and the other facilities needed by the community? What will happen to the staff in these businesses if their sense of security is removed? They may not know whether the business can survive the death of the proprietor. Every time the proprietor goes out for a walk they will wonder whether he will be run over by a bus. The livelihood of the people working in these firms will be placed at risk.
What will be the consequence? People will seek jobs in larger firms, in the bureaucracy, or, if they are anxious still


to work where enterprise and effort are rewarded, they will go abroad. The Government wish to drive the proprietors of these businesses and their staff out of the Kingdom. It is wrong to put this element, of fear behind every person working in a medium-sized family business. I ask the Government to think again, to look at the figures, and to speak to business men running such businesses.
The Minister laughed. However, this is not funny. This tax is a destructive measure. It is not merely a revolutionary measure to change society. It is a measure designed to kill one part of our society. It is divisive of our community as a whole.

Mr. Cormack: When we debated the Finance Bill in Committee on the Floor of the House, a number of Government supporters thought that I was exaggerating when I said that the Government seemed bent on creating a mixture of peasant economy and corporate State. I repeat that, because that is exactly what they are creating. There will be no room for the individual business owned and run by a family who care for it and have built it up over generations. There will be no room and no opportunity for the ordinary person of his own initiative to prosper.
I thought that my hon. Friends the Members for Basingstoke (Mr. Mitchell) and for Upminster (Mr. Loveridge) made extremely powerful speeches based on deep personal experience. I have no interest to declare. I have no small business in my family. I wish that I had. But I admire the talents of those who have developed, from what Napoleon scoffingly called a nation of shopkeepers, what I still believe to be the greatest nation in Europe.
In this Bill, the Government are discouraging talent and in some cases possibly perverting it. There will be two results from this measure. Many of the people referred to by both my hon. Friends will be discouraged from expanding their businesses for their own good and for the good of the community—enlightened self-interest has always been the best guide to any decent society. Others will be encouraged to use their talents to find ways round these provisions, and no doubt some will be suc

cessful. In other words, talents which should be used in a creative and constructive way will be either discouraged or even perverted.
One of the most moving experiences that I have had in recent weeks occurred when I went to Wolverhampton Town Hall three weeks ago to attend a meeting of the self-employed. There were 1,250 people in Wolverhampton Town Hall that night. They were not fly-by-nighters. They were not people who wanted to cheat. Nor were they people who wanted to fold up and go away. They were ordinary decent men and women—not people born with silver spoons in their mouths. They were people who by their own efforts had created businesses or inherited them and made them prosper for the good of the community as well as for themselves.
Those people attended that meeting because they realised that this Government were acting in a way which would make life impossible for them. I do not mean just by means of the pernicious tax that we are discussing now. I mean the blow to the self-employed from the increased contributions which they will have to pay from April and the enormous difficulties created by the swingeing increase in rates. Of course, to talk about either of those now would be out of order. But it is appropriate to mention them because they illustrate the triple blow which has been aimed at the self-employed and the small business this year.
When I spoke to the people in that hall and they felt that I had some message of good cheer for them, in a way I sensed that I was cheating them because I knew that the Government would not be persuaded of what I consider to be an unanswerably good case. I knew that the Government would not give them the opportunity for which they were asking—the opportunity to serve the community, the opportunity to prosper and, yes, the opportunity to make money and to build up the capital of the nation.
I just hope that the eloquent plea of my hon. Friend the Member for Basingstoke, who knows possibly more about these matters than anyone in the House, will have not fallen on deaf ears. He talked about terminal wards. There is a terminal illness threatening the very existence


of businesses in this country. It is the cancer of Socialism.
If only the Financial Secretary could take a leaf out of the book of some social democrats in other countries in Europe, who talk of their fine ideals, many of which the Opposition share, but do what they can to foster enterprise, to encourage initiative and not to snuff out the very life of our society, which is what this Government are in danger of doing.
The Government talk as though sums like £250,000 are vast sums of money. The Financial Secretary intervened in the speech of my hon. Friend the Member for Basingstoke to say that Mr. Chown argued that businesses worth less than £250,000 need not worry. Does not the hon. Gentleman understand that in terms of the inflationary society in which we are cursed to live, that is not a vast sum? If the Government propose hitting that type of company and business, they will be hitting at the root of society.
We are forced to one of two conclusions. The Government are bent on their destructive acts either through naivety, or by malice. It may be that it is a combination of the two. Being a charitable man, I prefer the first view. I hope that it is because of their naivety.
It may be that the lessons which have been put across by my hon. Friend the Member for Basingstoke, backed by the remarks of my hon. Friend the Member for Upminster, have not fallen on deaf ears. I hope that there is a desire in the Financial Secretary to learn from those who know from experience about this great problem.

Mr. David Mitchell: There is no desire.

Mr. Cormack: My hon. Friend says that there is no desire. I hope that he is wrong. Up and down the country there are tens of thousands of ordinary decent people who hope that he is wrong.
Let the Financial Secretary show his good intentions by accepting just one of these amendments, and we shall believe that there is a little hope. If he does not, all that we can do is to encourage those people to hope for the future and to pray for the day when another Government, less envious and less malicious, will occupy the Treasury Bench and sweep away from the statute book this evil scheme.

Mr. James Dempsey: My purpose in intervening is to ask my hon. Friend the Financial Secretary for some information about the purpose of the amendment and its relationship to the Bill.
I want to assure the Opposition, having listened to the muck thrown at my right hon. and hon. Friends earlier, that I have no business connections. I do not have a business. I do not have any stocks or shares. What I do not know about these matters would fill volumes. But I have been asked for some information about the operation of this tax, and I should like some facts and figures confirmed or denied by my hon. Friend the Financial Secretary.
One Scottish newspaper has been running a campaign designed to discredit the Chancellor of the Exchequer and the Government about the operation of the proposed tax. It has dealt in one article with the principle of the amendment which we are debating. I should like to know from my hon. Friend whether the facts and figures quoted in that article and quoted to me personally are accurate.
The writer of the article takes a number of examples of businesses of differing values which their proprietors propose to pass on to their sons so that they may take over the running of the firms. The writer claims that the cost of the application of this tax will be too high. He quotes the example of a business worth about £500,000, and he claims that that will attract £224,000 in tax.

Mr. David Mitchell: In setting the tax as low as he has, the writer of the article must have ignored the likely effect of capital gains tax. Can the hon. Gentleman say whether capital gains tax is taken into account?

Mr. Dempsey: I had the impression that the writer was quoting the capital transfer tax. He set out to show that the tax was imposing an inordinate burden on the recipient of the transfer. I was interviewed about the matter in my constituency and, frankly, I could not come up with all the answers. I am hoping that my hon. Friend will be able to do so when he winds up the debate.
7.30 p.m.
It was put to me that when the man comes to transfer his business to his son,


with a view to maintaining the business in Scotland, the proposed tax will amount to £224,000. That would be the taxation that would result from the transfer of the undertaking. Even accepting that the payments could be spread over eight years, that would mean £28,000 a year to meet the cost of the tax. The question is asked, Where is that to come from? "That is the question that I ask my hon. Friend.
I must give an answer to my constituents. I hope that my hon. Friend will pay attention. The undertaking may be valued at £500,000, but that does not mean that there is liquid capital of £500,000. That value may well include buildings, land, plant, equipment, stores and even credits. My constituents want to know how the payment of tax is to be made. That is the question that I am asking. That is the question that we have all been asking. I hope that my hon. Friend will be able to give me the answer.
I want to look at this matter from the point of view of practical politics. It is put to me that when a transfer is made to the young member of the family he cannot possibly produce £28,000 out of the hat. Therefore, he is face to face with what has been described as an inevitable implication—namely, the sale of the business to raise the money to pay the tax. Perhaps my hon. Friend will comment on that. Given the example that I have put forward, that would mean that 250 jobs could very well disappear in an area of persistently high unemployment.
I want to know how it is that the Chancellor expects to deal with the problem that I have outlined. When a father reaches the age when he wishes to hang up his boots and retire he will want to hand over his business to the young, vibrant, energetic and enthusiastic members of the family. He will do so with the intention that the business shall continue and that the younger members of the family will carry on the tradition of the business and the provision of employment in such parts of Scotland as I have in mind. I have been asked for information, but so far I have been unable to obtain it. I am very anxious to give a satisfactory reply to my constituents.
The newspaper that is running this tirade against the Government is no doubt

giving an incomplete report. I am not saying that it is giving an inaccurate report, merely an incomplete report. I am hoping that when my hon. Friend replies I shall be able to pass on the information that is at the moment hanging in the air. We are a democratic assembly and it is our duty to give this information. It is our duty to provide facts. It is our duty to prove that this tax will create no undue hardship. If it will not do so, we should be able to glean the facts which are obviously missing from the newspaper article to which I have referred. The newspaper concerned is a well-known and reputable Scottish newspaper although it has unquestionably a Conservative bias and slant. Nevertheless, it is reputable in the presentation of facts.
In discussing this amendment I can understand the feelings of Conservative Members. I say that on the basis of the facts as they have been presented and portrayed to me not only by the business community but even by some of my own colleagues. They are anxious to ascertain the true implications of the operation of the tax. It is only fair that we should have the information for which I ask. I am hopeful that when my hon. Friend replies he will be able to disabuse the minds of those who believe the tax to be anomalous, unfair, inequitable and an imposition.
I happen to believe that in this country there must be two sectors of industry—namely, a public sector and a private sector. If we have a private sector we must be strictly fair about how it should operate. It must be encouraged to operate efficiently. We must ensure that a fair profit is earned not just to provide a decent standard of living for those who own the undertaking but to ensure regular consistent employment and an adequate investment policy so that the industry can be modernised and maintained in a competitive fashion to enable it to be successful in winning orders. I am especially concerned about such undertakings providing and maintaining jobs.
I have been asked to raise this matter and to get my hon. Friend to confirm that it is the Government's intention to ensure that if this tax is applied and becomes operative it will be implemented without any undue hardship being imposed on any individual or number of individuals.

Mr. Peter Rost: The hon. Gentleman must be joking.

Mr. Dempsey: I am only seeking to obtain information. I do not belong to this aspect of life. I am a person who has always had to work with his own hands. I have never managed, owned or possessed. I hope that Opposition Members will bear with me. I am not concerned with the management of industry. All I want to do is to ensure that what we are doing is in the best interests of the community. Of course, the community includes industrialists. It also includes management and work people.
My only concern is to ensure that the operation of this tax is not as vicious as we are led to believe and that it is not as unacceptable as has been claimed. I want to ensure that we have regard to all the factors that I have mentioned before any fiscal policy is determined. After all, the aim of any fiscal policy should be not only the provision of full employment but the provision of a rising standard of life for those who manage and those who work.

Mr. John Cope: First, I must declare a small interest in a small business of which I am a director.
I congratulate the hon. Member for Coatbridge and Airdrie (Mr. Dempsey). He has made the best and the most farsighted speech on the Bill that we have heard from the Government side of the House. It was better than some that have been made from this side.
I should like to help the hon. Member for Coatbridge and Airdrie who slightly exaggerated the tax in the example that he gave. The hon. Gentleman read from the newspaper that the transfer of a business worth £500,000 might involve the payment of £224,000 tax. The actual figure is £223,875. That is capital transfer tax only. It does not include capital gains tax, development gains tax or any other tax which might be payable on the transaction. That is the capital transfer tax payable if the gift is made during the transferor's life. If he is unfortunate enough to die and the business passes to his son, the tax is considerably increased. The first thing that the hon. Gentleman should do if he has

a constituent in this position, as we gather he has, is to advise him not to die. Otherwise the tax will be considerably increased. That is the rate of tax that applies if the transferee, the son, pays it.
We had a debate earlier on the various circumstances in which the father or the son might pay the tax. The figure of £223,875 is the lower rate if the son pays the tax. I do not know what the amount will be if the father pays the tax, but I believe that it will be more than £500,000. Again, the hon. Gentleman's constituent should be careful to take advice before he does anything. If he is well advised, if he is careful and lives long enough, he may get the capital transfer tax alone down to £223,875 in that instance.
The question which the hon. Gentleman quite properly asked—I hope that the Financial Secretary will do his best to reply to it when he winds up the debate—is, how can people pay? I do not believe that they can pay. I shall be interested to hear what the Financial Secretary has to say in answer to his hon. Friend's question.
I am delighted that the hon. Member for Coatbridge and Airdrie should have come into the debate and perceived the point which we have been trying to put across and which has been put across to us by small business men in this situation. People faced with these problems are wondering how they will find the money to pay the tax if they die or pass on their businesses during their lifetime.
The debate tonight is not about the principle whether there should be special cases in the capital transfer tax. My hon. Friend the Member for Basingstoke (Mr. Mitchell), in an excellent speech, made it clear that that was the case. Nor is it about whether small businesses should be a special case in capital transfer tax because they are already to the extent of being allowed to make payments by instalments if the transferees pay. This debate is about how special a case small businesses, however defined, are in this tax or how special they should be.
I think that there is a difference—the tax is correct to recognise it as far as it does, but I think that it should recognise it further—between the owner of general assets which are relatively easily realisable and useable and the owner of a small business. That difference lies in the ability


to value the assets in the first place and to liquidate them in the second place. Primarily the difference lies in the fact that one cannot produce the tax which will be required without selling the business as a whole in almost every case.
7.45 p.m.
If people have money outside their businesses which they are able to use to pay the tax, they need not sell their businesses, but most people do not have such assets. I am almost certain that those who own shares in businesses will do their utmost to get and to keep money out of those businesses as much as possible from now on to build up funds of more realisable assets with which to pay the tax when the time comes. That will undoubtedly damage investment in the very sector where we would like to see a good deal of investment in future.
We know that some hon. Gentleman opposite want to see the last generation of every family business in this country. We also know that the intention of this tax cannot be to redistribute wealth, even in the sense in which Socialists use those words—that is, to take wealth away from the richer members of the community. The purpose behind the tax is simply to lock people into family businesses until the steamroller of the wealth tax can catch up with and squash them into the ground. The purpose of the tax is to prevent farms and other assets passing from one generation to another. If it is not amended, it will undoubtedly succeed in its purpose.
Frankly, I do not believe that that is the purpose of all hon. Gentlemen opposite. I do not believe that they want that to happen or that they think it is desirable from the country's point of view. Among hon. Gentlemen opposite who do not want this to happen I would include the Minister responsible for small businesses who was good enough to look into our debates last night when we briefly touched on the problems of small businesses. I am sorry that he is not here today. I know that he is an assiduous attender at debates on small businesses, but he has broken his record today. I expect that he had a good reason for doing so.

Mr. David Mitchell: I understand that the right hon. Gentleman has a special

reason for being away—namely, on small business work for his Department.

Mr. Cope: I am grateful to my hon. Friend for pointing that out on behalf of the Minister. I think that the Paymaster-General wants to encourage the small business sector and to see it flourish, not destroyed. I hope that hon. Gentleman opposite who have the same views will continue to hold them. We have had a good example today from the hon. Member for Coatbridge and Airdrie. I hope that we shall have more examples in the weeks between now and the Budget and between the Budget and the next Finance Bill of hon. Gentlemen opposite pressing their Front Bench to look at and consider these difficulties and doing their best to convince the Government that changes must be made in this tax if these businesses are to survive.
I am not hopeful that we shall get very far with any of these amendments tonight, but we shall do our best by going into the Lobby to carry them. That will not be the end of the matter. These businesses will not go overnight. They will be destroyed over a number of years. Until the last one has gone we shall continue fighting to try to keep them.
I do not know whether I shall be the small business man to whom my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) referred who will turn out the light, but until the light goes out we shall do our best to keep the light of small businesses burning. One way to do that is to vote for the amendments.

Mr. Denzil Davies: My hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey) made an excellent speech in which he posed a clear and precise example. I have no doubt that my hon. Friend the Financial Secretary will give him the kind of answer that his constituent would like.
My hon. Friend was not referring to a typical small business when he referred to assets of £500,000. That does not mean that the example was bad for that reason. I suggest that he should tell his constituent that if, sadly, he had fallen under a bus before 25th March 1974 he would have paid at least £223,875 in estate duty, and probably more. I do not


know the exact figure because I have not got the estate duty figures. He could have paid slightly less, but the figure would not have been very different under the old estate duty.

Mr. David Mitchell: Would the hon Gentleman like to add to the sum which he suggests would have been paid the words "provided he was unlucky, was ill-advised and had failed to take effective action beforehand"?

Mr. Davies: The point I am making is that if my hon. Friend's constituent owned all the shares in this company on the day before this tax came into operation, and if the shares were worth £500,000, the sum payable wouid not have been very different. That was the position then, and it is much the same today. I am saying that the bill for estate duty would not have been less than he would have to find today should he give away the shares under the old régime or do so now.

Mr. Robin Maxwell-Hyslop: Is the hon. Gentleman aware that under no circumstances was estate duty more than 100 per cent.? The aggregation of CTT and CGT can exceed 100 per cent. The hon. Gentleman seems to have missed that point.

Mr. Davies: The hon. Gentleman seems to have missed quite a lot. The fact is that £223,000 is not 100 per cent. of £500,000. I do not have the figures, but if what I have is incorrect no doubt my hon. Friend will put me right. I do not think there will be much difference between the position under the old estate duty legislation and what it will be now. If that is right, one can go further and say that if my lion. Friend's constituent had given away his shares in one block—which would be unusual—less than seven years before his death—and he could not with the best will in the world predict the exact date of his death—about the same amount of tax would have been paid under estate duty as will be paid under CTT.

Mr. Cope: It is not possible to say exactly what amount of estate duty would have been paid, because one cannot say what proportion of the assets would have come under the small business

relief under estate duty. If all the assets came under that relief the tax would have been £170,000 if he had died owning all the shares in the business, but if he had been well advised he would not have owned them all.

Mr. Davies: Given the most favourable interpretation, with all the reliefs, he would have paid £50,000 less, but, as the figures were put, the fact is that there would not be much difference under estate duty and under CTT with figures of that amount. That is perhaps a not wholly unsatisfactory answer.
But one is not concerned with a person who holds his assets and dies owning them all. The position will not be very different if someone gives away his assets less than seven years before he dies, though there will be a difference if a longer period elapses.
The next situation about which my hon. Friend's constituent is complaining is that under the old régime if assets were given away more than seven years before death—and this was done legitimately in many instances—there was no tax bill when the person died, but that has changed because of CTT. To that extent, my hon. Friend's constituent is worse off in the sense that he cannot avail himself of the opportunity of giving away his assets more than seven years before his death. Conservative Members have said that if such a person were well advised he would not have got himself into that position, but he seems to be in just that difficulty, so one must conclude that he was badly advised under the old law.
I come back to the argument about a small business worth £100,000 on which a person would pay a certain amount of tax. I suggest to Conservative Members that they know very well that a person in that position would not, for many reasons—some of them not fiscal—give away all his shares in his company in one block. There may be an isolated case in which that is done, but a person would not do it if he were well advised. He might give for example his two sons 24 per cent. each, or give away 48 per cent. or 51 per cent. but it is unusual that a person will give away all his shares. In any case, he may not own all the shares. His wife may own some, his son may have some shares and trustees may own some shares in the company.
We are not challenging the figures, and the Opposition are entitled to put the extreme case. Reference has been made to a company worth £100,000. I am saying that that kind of situation would rarely occur because people would rightly and legitimately be advised to give away their assets over a period of time, and to that extent the burden of the tax would not be considerable.

Mr. Nicholas Fairbairn: Does the hon. Gentleman appreciate that on his slim figure of £100,000 this infant prodigy would have to start at birth, live to be 100, and give away £1,000 a year in order not to pay tax?

Mr. Davies: If he had a 100 per cent. interest in a family company, his son would pay £14,000 spread over eight years, which is £1,750 a year. I am not saying it is a minimal sum. Nobody likes paying tax, but that money would have to be found on a business worth £100,000 if all the shares were given away, and that amounts to £1,750 a year for eight years. It is a burden, but not an unreasonable or unfair one in all the circumstances.
We then have to consider the fact that a man might give away minority interests. The value of those minority interests would not be proportionally less than the total interest, but they would be less all the same. That is what happened in the past, and it will happen in the future. I do not think we should exaggerate the position. There is a problem, but the Opposition have marred their case by exaggerating it, especially in Committee, where they did so night after night, with the result that the case was not put as well as it should have been.
I am prepared to accept that CTT heaped on CGT makes life more difficult. In Committee, my right hon. Friend the Chief Secretary did not say very much, but he did say that he was going to look again at CGT and I hope he will do so. I do not see that it makes sense to heap one tax upon another. I do not know how it is possible to do it, but one has to be fair between taxpayers. I think that something should be done, and I hope that my right hon. Friend will pursue his investigations into the matter.
I now come to the question of reliefs for CGT. If a person gives away assets on his retirement, there are certain reliefs. It does not follow that the total value of the shares will be subject to CGT, because that may not be the total value of the gain. Nevertheless, there is a problem with capital gains tax and I hope that my right hon. Friend will look at it.
8.0 p.m.
We are concerned not only with business assets but with other assets. In Committee we considered what I would call a small farm, which in the Welsh context would be one of less than 200 acres. I was satisfied on that basis, especially by the new lifetime rates that there was not a problem. Let us consider the larger farm. I read with interest the speech of the right hon. Member for Cambridgeshire (Mr. Pym) yesterday, who seemed to forecast the demise of British agriculture. He said that we would be turned into a peasant community as a result of this tax. That, again, is an example of exaggeration which does not do Conservative Members any good.
Let us consider a farm of 500 acres which is a large farm, even by English standards. Assume a rental value of £10 an acre. Hon. Gentlemen may say that that is not high enough. I do not know. It is not too wide of the mark. If we take the valuation in this legislation it produces a farm worth £100,000 for capital transfer tax purposes. A gift of the whole of the farm to a son would be a gift of £100,000. Under capital transfer tax that would represent £14,000 spread over eight years—£1,750 for each year. In their quieter and calmer moments I believe that Conservative Members will agree that that could not be described as the destruction of British agriculture. People do not like paying taxes but I do not think that that is an unreasonable burden.

Mr. Peter Rees: I believe that the hon. Gentleman will, on reflection, agree that his example is a little misleading. First of all this is because very few 500 acre farms, apart from the part of the world from which the hon. Gentleman comes, would be sold for £100,000. Beyond that the hon. Gentleman is overlooking machinery, stock, buildings and all those other items. I hope that on


reflection he will prefer to tailor his example to the facts.

Mr. Davies: I never said that a farm of that size would be sold for £100,000. What I said was that using the valuation in the Bill that would be the value for capital transfer tax purposes.

Mr. Peter Rees: What about stock?

Mr. Davies: I do not know about stock. I accept that the value of stock would be in addition and so the taxation figure would be a little higher.
Many farms of that kind would be owned by companies and the shares would not be given away immediately in one block. I understand that there is an amendment to enable a £1,000 exemption to be accumulated and passed on from year to year if it is not used. That affords a certain amount of relief if the assets have been held for a long time.
I do not believe some of the exaggerated statements made by Tory Members. They cannot be justified. I accept that there are some problems about capital gains tax when it is heaped on to capital transfer tax. Conservative Members have said that they do not like this tax and want to repeal it. But they have not said what they will put in its place. It is their duty to do so. Do they want the old form of estate duty? Presumably not, because many people in all parties saw the old system as being capricious, unfair and depending entirely on whether a person gave property away more than seven years before his death.
If this tax is not to be replaced with estate duty, what will be put in its stead? Will it be the inheritance tax system produced by Lord Barber in his Green Paper? There are advantages, in that assets can be moved around in the family at lower rates. But if the Conservatives wish to maintain the same yield as that which obtained under estate duty and the yield which hopefully, in a few years, will accrue under this tax, the rate of the inheritance tax would have to be high. I predict that hon. Gentlemen would scream in the same way as they are screaming now.
There is also the accessions tax. That is extremely complicated. I predict that in Committee hon. Gentlemen would be

complaining and raising anomalies about it. They should explain to us what kind of tax they want, or else they should be honest and say that they do not want a tax on capital transfers. Alternatively, they should say that they will reduce the rate significantly, in which case the yield would be reduced. They must then tell us how they would make up the difference. There are problems, but these have been exaggerated by Conservative Members who consequently have not done justice to their case.

Mr. Maxwell-Hyslop: This is a tax that has changed its nature. Once upon a time taxation was something that redistributed part of the wealth of an individual or business, but did not destroy the capacity of that individual or business to continue generating wealth. With this tax we cross the frontier between taxation, as it has always been considered, and confiscation—the destruction of the wealth-producing assets grouped together in a business.
In the South-West the representative employer is a small employer, not a large firm. This is generally true in the private sector throughout the South-West. Indeed, this applies to a large proportion of employment in Britain.
The point that has been missed is that once we bring about a situation where capital assets are transferred, the point at which they are transferred—whether by death or a capital transfer more than seven years before death—is the point at which the business is no longer viable. In a taxation system where that happens, such businesses are no longer creditworthy. The banks and financial institutions will not gamble on supplying the working capital needed by a business knowing that it will suddenly become nonviable at a point in time which it is impossible to predict. That point is when death forces the dispersal of those assets or when their transfer in advance of death generates a situation in which the business either completely runs out of working capital—because working capital is the only liquid capital. Alternatively, when the assets are transferred the person or persons to whom they are transferred become so encumbered by debt to meet the tax liability that the annual interest payments to service those debts makes the business or the person, or both,


uncreditworthy. That is the situation we have now reached.
I might say en passant that inflation has completely destroyed the distinction between a capital gains tax and a capital levy. The distinction is real only when there is a zero rate of inflation or a controlled rate. At the moment, because of inflation, what started as a capital gains tax has become a capital levy, although the arguments for the two and the effects of the two are totally different.
When anyone says that it was the Conservatives who brought in capital gains tax that is perfectly true, but it has to be remembered that it was brought in as a tax on capital gains at a time when inflation was about 3 per cent. per annum—a totally different situation from today. One of the factors that the late fain Macleod had closely in mind in his thoughts about the alterations that were necessary in taxation was that, so as not to blur the distinction between a capital levy and a capital gains tax when assessing liability for the latter, there should be subtracted from the accountable gain that which was the reciprocal of the changing value of money, which is something entirely different.
What should be taxed as a capital gain is a real increase in capital, irrespective of the change in the value of money. Our present inflation of over 20 per cent. means that what started as a capital gains tax has achieved the characteristic of a capital levy. When this is superimposed on a capital transfer tax which is itself grossed up, we have completely confiscatory legislation.
It is clear that some Labour Members have grasped this point. However, since at this crucial moment for every British business only four Labour Members are present on the back benches, clearly the point does not worry many of them.

Mr. John Tomlinson: We have not seen much of the hon. Member over the last two or three days.

Mr. Maxwell-Hyslop: If the hon. Gentleman thinks that, he could not have been here last night.

Mr. Tomlinson: Yes, I was.

Mr. Maxwell-Hyslop: The effects of the Bill on small businesses are crucial. Part of this matter was discussed for a

trivial time, less than half an hour, last night before the guillotine fell. We are having the rest of it today. It will be too late for Labour Members to say that they had not realised the consequences, when business after business in their constituencies collapses and unemployment caused entirely by this tax stalks their constituencies.
Too late then will Labour Members say that they did not know the consequences. They have been warned. It is not too late for them to heed that warning in the Division Lobby. But it will be too late if they merely trust to their Front Bench to have another think at some unspecified time, arriving at some unknown conclusion when it is too late for it to be effective anyway.
Even without paying a penny of this tax, businesses large and small are running out of working capital every day. Three weeks ago in my constituency, 40 men were laid off by one firm which collapsed. Twenty-five were laid off last week by another company running out of capital and 50 were laid off a few weeks before that at the other end of the constituency.
It is the creditworthiness of every firm that is at risk, even before this tax begins to bite. Merely knowing that these firms will be brought to their knees, no sane bank manager could regard them as creditworthy. The damage will be done the moment the Bill become law. Then they will have to go to the marginal financial institutions, some of which have already tottered—even hon. Members who should have known better have taken part in activities of that kind—to be charged a punitive rate of interest. The normal commercial banks recognise a bad risk when they see one, which the marginal firms do not.
Therefore the costs of these firms will increase further and further as they have to finance their increasing needs for working capital in a period of chronic inflation by going to the fringe so-called banks to pay usurious rates of interest for the working capital without which they cannot continue in busines at sufficient throughput to cover their overheads. Banks at the moment have claims on their available resources to lend far more than they can lend and, incidentally, far more than the Government want


them to lend. The Treasury keeps a tight control on these matters at the moment.
8.15 p.m.
Where is the working capital to come from? That is the question that the Government have not answered, although their own Members have been asking them. The only available liquid funds will come from the businesses concerned and at an excessive rate because of grossing-up. Who will buy these little businesses which can be sold only as going enterprises? The alternative is simply to break them up and sell them for redevelopment, in which case the employees will lose their jobs, as we have seen so often.
That will happen throughout the country. Too late, the Labour Party and its supporters will suddenly discover how much employment depends on the small businesses as one after another collapses. The cascade effect will be set off remorselessly, and it will then be beyond the Government's power to arrest or reverse that process. We have seen the cascade effect of depression before, in the 'thirties. This cascade effect will have been deliberately generated by a Government who know what they are doing. If they did not know before, they should know now because they have been adequately warned.

Mr. Tomlinson: We are still hearing a repetition of generalisations about the capital transfer tax. The hon. Member for Tiverton (Mr. Maxwell-Hyslop) talked about the effect on small businesses. He should concede that, following the Committee debates, the Government recognised that the effect of the tax as it originally stood on small businesses might have been more serious than anyone could reasonably justify. They have substantially lowered the rates on lifetime gifts and have introduced new lower levels to apply right across the range—not only to agriculture and small businesses—in order to avoid distortions.
For most small businesses, particularly shopkeepers, who have not been able to afford sophisticated advice to enable them to avoid tax, capital transfer tax will be a big improvement on the present situation. Widows will be able to inherit businesses without the tax applying and

children will pay far lower rates than under estate duty. There have been accusations of discrimination and bias against small enterprises, yet most of the areas in which complaint has been made the lower rates of capital transfer tax will lead to substantial improvement.

Mr. David Mitchell: Will the hon. Gentleman give way?

Mr. Tomlinson: I will extend to the hon. Gentleman the same courtesy that he extended to me by refusing to give way when I tried to intervene in earlier parts of the debate—

Mr. Mitchell: The hon. Gentleman was not here.

Mr. Tomlinson: The debate has been going on not just today but yesterday and the day before. If he thinks back, the hon. Gentleman will remember the occasions to which I refer.

Mr. Peter Hordern: Perhaps in considering this matter the hon. Gentleman will talk about the effect of the capital gains tax, which, as he knows, did not apply with estate duty.

Mr. Tomlinson: I am making my own speech. I am sure that if the hon. Gentleman wants to talk about the effect of capital gains tax and catches the eye of the Chair, the House will be only too interested to hear what he has to say.
On the particular problem of small businesses, we are comparing the effects of capital transfer tax with the effect of estate duty where in both circumstances capital gains tax applied. In many of the issues about which we are concerned the small business is preferentially treated now under the new proposals as compared with the situation which would have existed under estate duty.

Mr. Hordern: Will the hon. Gentleman give way?

Mr. Tomlinson: I have not that degree of charity. Many hon. Members of the Opposition wish to speak in the debate. We want to make progress and to have as much discussion as possible.
I come, therefore, to one particular point of concern in the general tenor of the debate in the last couple of days, which has been re-emphasised this evening. Many people are suggesting that


the rate of tax ought to be cut even further. Even after all the concessions in so many of the Government's amendments on Report, hon. Members are asking for more and more. The loss of revenue that is proposed with equanimity is reaching very serious proportions.
We ought now to contrast the enthusiasm of Opposition Members for cutting the revenue with the kind of hysteria they demonstrate so regularly about the level of the public borrowing requirement. This is hypocrisy of the first order. To complain about the level of public borrowing requirement and then to come before us with such monotonous regularity pressing further and further diminutions of the revenue from capital transfer tax is something that the House cannot accept.
I echo the words of my hon. Friend the Member for Llanelli (Mr. Davies). If Opposition Members have serious doubts about capital transfer tax—which they clearly have—it is obligatory that when they are criticising that tax and opposing it, as the hon. Member for Tiverton did, they should say clearly with what they would replace it. We have had totally destructive criticism and, so far, no adequate alternative.

Mr. Loveridge: Does not the hon. Gentleman recognise that we believe that the loss of revenue is likely to be far greater due to the forced sale of businesses which will arise under these taxes?

Mr. Tomlinson: No doubt the hon. Gentleman genuinely believes that. I certainly do not recognise it.

Mr. Cormack: The hon. Gentleman will, however, recognise that in the first year, when the country is facing perhaps its most dire problems, this tax will bring in less than would estate duty.

Mr. Tomlinson: That point has already been dealt with in the debate. I do not recognise the interpretation that the hon. Gentleman puts upon it.
I want to emphasise the point that it is far too easy to come before the House, after all the concessions have been made and when the Government are proposing losses of revenue by their own concessions, and to propose far greater losses of revenue and, at the same time, to have

this concern about the public borrowing requirement. I am concerned about the level of the borrowing requirement. During the Budget debate I criticised my right hon. Friend the Chancellor. I said that we must be seriously concerned about that matter and that our concern should manifest itself in trying to find better ways of raising revenue. I believe that capital transfer tax makes a substantial contribution to that process. That is why I hope that we shall leave the tax as it stands and not be receptive to the destructive ideas of Opposition Members.

Mr. Russell Fairgrieve: The hon. Member for Meriden (Mr. Tomlinson) mentioned the word "hypocrisy" in relation to my hon. Friends on the Opposition side of the House. I say this to him. During the debate today I wish that he had spoken in the same way as he spoke between 2 o'clock and 3 o'clock this morning, putting forward economic arguments and expressing human sympathy about the Meriden co-operative. That, I presume, is a small business. But those particular arguments have been slightly lost during the intervening hours.

Mr. Tomlinson: That gives rise to a very interesting concept of the small business. That business is valued at £4·95 million.

Mr. Fairgrieve: We are talking about part of the business and not total value.

Mr. Tomlinson: The Meriden co-operative is worth £4·95 million.

Mr. Fairgrieve: Perhaps I may leave the lush industrial Midlands of England and go a little further north to Scotland and, for example, to my constituency of West Aberdeenshire. Small businesses there form a far higher proportion than they do elsewhere in the country. When dealing with questions of small businesses and their taxation, we are not dealing with questions of rich men or people who can pay taxes out of money held. We are dealing with people who do not have liquid capital. We are dealing with small firms, farms, garages, small shops and small traders.
In Scotland, one in four persons is employed in a small business. That leads on to the fact that nearly half of those in productive industry are employed in


small businesses. It is not for me to display the economic and technical arguments which have been so well put by some of my hon. Friends, not only at this stage but in Standing Committee. I want merely to point out the inevitable truth that we all know—that such businesses will have to sell.
Labour Members do not seem to realise that these businesses and the men who run them have no cash. They have stock, property and machinery, and probably an overdraft. Therefore, if they have to sell they can sell only their businesses. They are not directors of large companies. They are not in nationalised industries or getting large salaries and owning shares in other companies which they can sell. They have committed everything they have to their own enterprises.
Leaving aside the economic arguments, what also happens when such businesses are driven into the ground? If they are sold, we know perfectly well that they can be sold only to the State or to large corporations. The first thing that happens is that the local link goes. Some businesses support local charities. That will all stop. It gets covenanted from headquarters because they do not understand the necessity of supporting local charities. Where small businesses have contributed people to the local council, all this goes. A directive comes from head office indicating that there is no time to allow people to take part in local community activities.
That has been the result all over the country when small businesses have been taken over by large businesses. The community in which the small business exists suffers economically, socially, and in every other way.
The next thing we hear when small businesses are taken over is the word "rationalisation". That is the polite name for inefficiency. When a local or small business becomes less efficient, an excuse is made and it is closed. From the small business sector come the future entrepreneurs and the people on whom the nationalised industries and the large public corporations will rely to keep going. That is the sector we are damaging.
All the household names have come from small businesses, in textiles, the retail

trade and the motor industry. They were all people who were prepared to risk their own money and to work any number of hours. We are killing the most efficient and least costly sector of British enterprise. When a small business gets into trouble it goes out of business, but when a large or nationalised industry gets into trouble the State steps in with money. We are doing something criminal affecting the whole of Britain. We are killing those upon whom we must rely in the future to lead the country into prosperity for all its peole.

8.30 p.m.

Mr. Pardoe: The hon. Member for Meriden (Mr. Tomlinson) and the hon. Member for Llanelli (Mr. Davies) said that the Opposition should come forward with their alternatives to the tax. They cannot accuse me of having no alternative, because even the Chief Secretary will recognise that I have advocated an accessions tax. I believe that that is the tax the Government should have introduced. I agree with the hon. Member for Llanelli that if I were introducing an accessions tax the Tory Party would be baying like the Society for the Preservation of the Rich that it is. I have no doubt that Conservative Members would squeal just as hard as they are doing today. An accessions tax would be a vast improvement on what we have now.
The hon. Member for Coatbridge and Airdrie (Mr. Dempsey) spoke forcefully about the possible effect of the tax on a firm in his constituency. We have had replies from Labour Members which indicate that they do not take these remarks too seriously.
I do not intend to debate small businesses tonight, because I want to turn my attention to another amendment. However, it is at least likely on the basis of the facts we have had—although we do not have too many—that the firm about which the hon. Member for Coat-bridge and Airdrie spoke was an industrial hereditament and that therefore, under estate duty, it would have had the 45 per cent. concession. Therefore the situation with estate duty, whether or not the owner of the firm had walked under a bus and had made no provision, would probably have been much better than may well be the position in this case.
The debate on the Government's amendment and on Amendment No. 80 in the name of my right hon. and hon. Friends and myself, to which I wish to turn my attention, is not primarily about small businesses. It is about the fundamental nature of the tax. As I am sure the Chief Secretary will recognise, I am not endeavouring to plead a special case in Amendment No. 80 but am trying to save the Chancellor and the Government from making an appalling error in the very character and essentials of the tax which they have introduced.
I understand that there were two things the Chancellor wanted to do when he introduced the capital transfer tax. He originally intended that it should be an anti-avoidance measure. I want to save him from the mistake he is making. He made it quite clear yesterday when he said that the central fact was
that the Government are now replacing a tax which was ineffective and unfair—ineffective because it was avoided on a colossal scale and unfair because it was avoided by only a minority of those affected and observed by the rest—by a tax that we believe to be fair and effective".—[Official Report, 5th March 1975; Vol. 887, c. 1492.]
The right hon. Gentleman spent a considerable portion of that speech on the whole question of avoidance, primarily the avoidance through the lifetime loophole. I do not split hairs about this. I think it was a loophole, but that does not mean that it was illegal. Of course it was not. We all know that there was avoidance on a scale which the Chancellor thought was much larger than I supposed it to be, but it was obviously substantial and interfered with the basic concept of estate duty. To that extent I entirely agree with the Chancellor's motives for introducing the capital transfer tax.
When the Government have introduced a tax to get rid of the lifetime loophole, what on earth is the point of introducing an amendment which brings it right back again? The purpose of estate duty was presumably—we do not have to go back to Sir William Harcourt to find it—to reduce inequality of wealth caused by inheritance. Sir William was a Liberal, and I am a Liberal. I do not believe that the span of years distinguishes between us. That purpose is certainly something I wholeheartedly

accept in principle, though how far inheritance causes inequality may be a matter of debate.
The only research that has been done on how far inheritance causes inequality in the distribution of wealth has been done by Professor Harbury. In yesterday's Press we were informed that he had renewed his dedication to the task by undertaking a study into where rich women get their riches. You will notice, Mr. Deputy Speaker, that he does not call it a study—

Mr. Deputy Speaker (Sir Myer Galpern): Order. I hope that the hon. Member will not read out a list of these women. There are insufficient numbers of hon. Members in the House already, and the place could become deserted if the hon. Member gave a list.

Mr. Pardoe: Indeed not, Mr. Deputy Speaker. I was going to point out that this gentleman was conducting a study not into how rich women get their riches but where they get them. If he had adopted the former course he would have had a best seller.
Inheritance is not the only cause of inequality. Estate duty may have stopped inequality getting worse but it did not do much to reduce it, and that was not only because of the lifetime loophole. Owners of great wealth usually get a higher return on their wealth. Certainly they get a much larger capital gain on their wealth than do owners of small wealth. Large wealth owners are also far better able to take advantage of the lifetime loophole because they are far better advised. They are able to pay for the advice. Now the Government are reintroducing the lifetime loophole. If it had not been for the fracas earlier over the remarks of the hon. and learned Member for Dover and Deal (Mr. Rees), I might almost have been inclined to think that it would be in the interests of the Chief Secretary, when in some future incarnation he goes back to his practice after having deserted the Front Bench to reintroduce the loophole. To do so would create a bed of roses for accountants. Our amendment, therefore, urges the Government not to go back to the lifetime loophole.
Let us take a step further the logic of what the Government are proposing


concerning the rates. Without a gifts tax the avoidance of estate duty was far too easy, and because this reduced the power of estate duty to cut down the inequalities caused by inheritance the Government introduced the capital gains tax. The case of avoidance was lessened by the seven-year inter vivos provision for gifts. We know very little about the giving of gifts in Britain but we know a great deal about the giving of gifts in the United States. There the gifts tax is at a different rate from estate duty. The two taxes are not fully integrated. There is, therefore, considerable incentive to give gifts inter vivos. It is not as great an incentive as has hitherto existed here because in this country, provided that the donor survived the seven years, the gift was free of tax altogether.
The evidence in America suggests two things. First, among the less wealthy the giving option was not fully exercised. It also suggests—this is the point I want the Government to deal with—that the wealthiest people in America indulge in inter vivos gifts almost as a way of life. That will be the case here if the amendment is made in its present form. The wealthiest will find it easier to give their money away. After all, they are giving away only some of their wealth, not all of it. If a person has £1 million, it is not too irksome for him to give £300,000 of it and get the benefit of reduced tax rates. Under the American experience, however, someone who is less wealthy finds it very much more difficult to do that because he then loses his independence.
The Government's lower rates on gifts tax cover only cumulative gifts of £300,000, and this will still help the very wealthiest. The figure of £300,000 does not represent poverty by any manner of means. At lifetime rates £300,000 has a net value of £196,000, which is what remains after the tax has been paid. At the full rate £300,000 has a net value of £155,000, so that there is a saving of £40,000 on a total amount of £300,000, which is not to be sneezed at.
I wonder whether the Government in introducing this quite appalling principle of the lifetime loophole have looked at the American evidence and, if they have, whether they reckon that that experience will be repeated over here. I do not need

to prove to the Government's satisfaction the exact extent of avoidance by the lifetime loophole. The Government have already stated that that is a major method of avoidance. They introduced the tax to remove the incentive to avoid estate duty. They have now reintroduced it, and I want to know why. They have never begun to tell us. I hope we may be told in the course of this debate.

Mr. Esmond Bulmer: Since this sum is so often represented by a business, if £10,000 represents one job we cannot go on arguing in this way without coming back to employment. Will the hon. Gentleman tell us how the Liberal Party would deal with that?

Mr. Pardoe: If the hon. Gentleman had looked at Amendment No. 80 he would have realised what we are doing. For every gift on death, what the Conservatives' amendment is seeking to do affects a very limited number of legacies on death; and I marvel at their moderation. They have been unnecesarily timid in limiting their amendment. But I do not actually believe that Opposition Members make their case much stronger by pretending that employment and small businesses will collapse and that the whole British economy will collapse and slide into the North Sea as a result of this tax. It may well be that the whole British economy will slide into the North Sea, but it will not be because of this tax. I can think of many other things which are much more likely to get us there.
Distinguishing between the rates of tax on gifts and on legacies produces great unfairness. Again, I do not quite understand what the Government are at. Not all people are as well able as others to make gifts. Some property or parts of property are easy to give while other property is not. Therefore some people will be able to avoid the full rate, not because they are generous or good people. There may be some who have patriotic objections to this method of avoidance. There will not be many of them today I suspect, but there may still be some left.
It is also a negative tax on gambling. It is gambling on death, and the price is a reduced rate of tax under the Government's amendments. The Government are saying "You may take a gamble on your death. If you win, we will reduce your tax. If you are dead, it does not


matter to you anyway. But we will tax you more heavily as a penalty for dying too soon." That was what estate duty did.
I cannot think why the Government have introduced capital transfer tax at all. We might have gone on with estate duty at slightly lower rates. The greatest argument as between lifetime and death rates is the effect on inequality. The Chancellor and I both wish to reduce the inequalities of weath but I would make a better job of it than he has done. That is the essential difference between us. Here the right hon. Gentleman has introduced the wrong tax for that purpose and has changed it to produce an even worse effect on equality. He has decided that the rate to be introduced was too high for lifetime gifts. Therefore, he should accept the logic of the argument and reduce both rates. If he does not want to reduce his revenue because he is worried about his borrowing requirement—and I do not wonder at that—I would far rather he had introduced an amendment providing a compromise rate, somewhere between the two, so that at least it was the same for both types of gifts and ensured that his revenue would be maintained.
I hope that the Government will accept the argument I have adduced on the single rate of tax which is contained in our Amendment No. 80. I hope they will recognise that it is a totally logical argument and would produce a very much better tax than that originally introduced, and certainly very much better than the one we are to be stuck with this if the Government amendment goes through. We have taken the table which the Government introduced for the lower-level gift and have sought to apply it right across the board to all types of gift. That seems to be by far the most sensible thing that the Government could do.

8.45 p.m.

Mr. Douglas Crawford: I should like to bring into the debate the Scottish dimension which was introduced by the hon. Members for Coatbridge and Airdrie (Mr. Dempsey) and Aberdeenshire, West (Mr. Fairgrieve). They might perhaps be more helpful to their constituents if they supported Amendment No. 439 on page 667, which seeks to give greater relief from the tax

to small companies and goes further in the tax slice than do the Government for companies which are moving towards public quotation.
Large companies are well able to look after their growth and financial affairs, whereas small companies are not. When a company is worth £1 million or £2 million, I suggest that the time has come for an even more significant redistribution than that proposed by the Government. Small companies are different. They do not just happen. They are created by men and women of vision and imagination. I hope that the Minister will accept that my arguments are not made from a hyperbolic and doctrinal standpoint, as were the arguments put forward by the Conservatives, but from a practical point of view.
I am not talking about thousands of pounds being made in a few minutes on the Stock Exchange. I am not talking about companies like Wm. Lowdon & Son which has donated generously to the Scottish Labour Party. I am talking about what causes a seed to flower or an acorn to grow, or what causes one job to become two.
The hon. Member for Basingstoke (Mr. Mitchell) referred to Scotland and Wales. In Scotland there are proportionally more small businesses than there are in England, and the proportion will grow because of what the Scottish National Party calls Scottish oil. That development is spawning small companies in Aberdeenshire, in the North-East of Scotland and throughout the whole country, and similar developments are taking place in electronics.
The Under-Secretary of State for Industry recently said that almost 90 per cent. of all manufacturing establishments in Scotland employ fewer than 250 people. He went on to say that these smaller firms were specially important in a number of industries of key importance to the Scottish economy. I hope that the Under-Secretary of State and the Treasury will speak with one voice when they seek to promote small industries in Scotland.
The growth of locally-owned industries of high technology in Central Scotland is vital if we are to break away from our dependence on heavy industry. I am sure that the Minister wishes to see more—not fewer—indigenous jobs in Scotland. The severity of the level of the tax will lead to


the break-up of Scottish-owned companies and asset strippers will be the first to benefit. It will also lead to the takeover of Scottish companies by London-based institutions, against which the Scottish Council, the STUC and the Scottish Council of the CBI have consistently and continually inveighed.
Let us take as an example a small Scottish company with an annual turnover of £300,000 or £400,000 and a net asset value of £100,000, £120,000 or £130,000. Let us assume that it has been going for 10 years and employs 100 people, and that it was started by a man aged 35 who is now 45. If that man dies, his wife and offspring must find £40,000, or even £50,000, and that effectively will lead to the end of the company. Therefore, the takeover of that company no doubt will soon follow by a London-based institution, thus once again bringing about centralisation.
We in the SNP do not wish this to happen. For the sake of the creation of more indigenous companies in Scotland and to prevent their takeover by institutions in London, we ask the Government to think again about Amendment No. 439. It seeks to give more relief at the lower end of the tax scale and is even more penal than is the Government's own provision at the top end of the scale.

Mr Cryer: I am grateful for this few moments in which to bring a somewhat different view to bear on capital transfer tax. We have heard a chorus of complaint from the Opposition, or certainly from the principal Opposition, about the effect of the tax. It was a wholly spurious argument.

Mr. Tomlinson: Does not my hon. Friend agree that at present because of the interest in this debate the official Opposition is a combination of the Scottish National Party and the Liberal Party?

Mr. Deputy Speaker (Sir Myer Galpern): Order. I suggest that we do not have this usual cross-talk between the two hon. Members. Let us get on. There are a substantial number of amendments still remaining for discussion.

Mr. Cryer: I know, Mr. Deputy Speaker, that you were using the word "usual" in a limited sense.
The capital transfer tax seeks to put into effect Labour Party policy. Whether the Opposition like it or not, the fact is that the Labour Party manifesto in two elections committed us to an irreversible shift in the possession of wealth.

Sir John Hall: Is the Labour Party committed to the destruction of private business?

Mr. Cryer: It is absurd to say that the tax will destroy family businesses. It will not. I am concerned not about the fact that the tax is too hard but about the fact that it is too soft. The Labour Government made a number of concessions in Committee. For example, a joint business involving a man and wife will have to reach a value of £30,000 before it even contemplates paying any tax. Over a period of time, with the allowance of £1,000, the couple could manage to move a considerable amount of wealth from one person to another without the possibility of paying tax. That alarms me.
The Government Front Bench has been generous and has taken account of some Opposition representations. When the Opposition speak of the destruction of family businesses, it is all part of a united campaign to frighten people outside the House into believing that it is a penal tax. What is certain is that the tax will be difficult to avoid. That is the basis of the Opposition's fear. The CTT will not be like the old estate duty. It will be a tax that will be applied. If the Opposition are so keen on tax loopholes, why do they not say to the PAYE man, who has no alternative but to pay tax, "Look for loopholes and we shall provide you with accountancy services free." In the past the payment of tax has depended, not on eligibility but on the degree of the accountant's ingenuity. Ordinary working men and women do not employ an accountant to scrutinise their wages.

Mr. Fairbairn: Does the hon. Member for Keighley (Mr. Cryer) appreciate that the PAYE man can take four weeks off and reclaim his tax, even if he is not sick? That is a loophole, too.

Mr. Cryer: I am appalled at the hon. Gentleman's intervention. Is he saying that a doctor would conspire to provide an employee with a certificate to enable him to take several weeks' sick leave in a spurious circumstance? That is characteristic. If a small business man is ill, that is an onerous circumstance. However, if an employee is involved, that is a dodge. That is characteristic of the attitude of the Opposition towards this tax.
I shall quote evidence to support my point. The hon. Member for Cirencester and Tewkesbury (Mr. Ridley) said:
This is not a tax which, in the words of the Opposition, is voluntary and avoidable. This is a tax which will have to be paid because all the loopholes have been stopped up. As I explained earlier, the only reason I always believed estate duty to be tolerable was that there were loopholes. Not that there are no loopholes in this tax, it is not tolerable."—[Official Report Standing Committee A; 4th February 1975, c. 658.]
It is not a question of equity, of redistribution of wealth, of a fairer society, of people making a contribution to society. Nor is it a question of the benefit of mankind or of the community. The question is what people can get out of it for themselves and what they can grab and put into their own pockets. That is the basis of the Opposition's attitude towards this tax. What do they say when they must pay it? They say, "It is a dreadful tax and we are embarking on a Marxist society. Family life will break down." That is the extraordinary overemphasis which the Opposition have produced. Yet the Government have given tax concessions to the do-it-yourself builder, who is the creator, more than anybody else, of the family home. The Labour Government did that—not the Conservatives when they were in power.
The Government are accused because greedy people have decided that this tax cannot be avoided and that they will have to pay it. Those greedy people are alarmed. When the Opposition say that the £30,000 allowance is not very much they will hear hollow laughter from the millions of working men and women for whom £1,000 is almost unattainable.

Mr. Hamish Watt: Does the hon. Member for Keighley (Mr. Cryer) claim that the average fisherman who has perhaps a fifth share of a family boat,

the value of which is £60,000, is not a working man?

Mr. Cryer: The hon. Member for Banff (Mr. Watt) and I share a good deal of concern for people with small businesses. The hon. Gentleman is critical of people owning big businesses such as Mr. Cummings, and obtained valuable publicity from a critical letter which he wrote to a Sunday paper. I do not think that there is much to divide us.
We must set the record straight. This tax is not onerous, nor is it heavy. I am concerned that Ministers have given away too many concessions. I hope that the Minister will give us an assurance that when this tax has been in operation and the position has been reviewed, it will be made to work even more equally than it does now, and that some of the concessions already granted, albeit in a generous, co-operative spirit, will be reviewed upwards rather than downwards.
The message must go out from the House of Commons that the Labour Party is embarking on a taxation system in which tax avoidance and loopholes are being stopped and that the man on the shop floor who pays his tax before he receives his money is not in a position to manipulate anything, since he cannot afford to employ an accountant to see what loopholes there are, and must face a greater burden of everyday life than some of the small business men who have been described by the Opposition.
I do not dispute that some business men make a useful contribution to the community. Those who do will be prepared to pay this tax because they are not the kind of people who pursue tax avoidance. Any person playing a part in the community will see that tax revenue provides the services and needs which the whole community shares. But those who say that the Labour Government are producing a tax which will burden the rich are people who for many years have been avoiding tax.
Outside this House people will say that that is precisely why they elected a Labour Government. They did not elect a Labour Government to provide those who have all the wealth with loopholes. The Labour Government represent the vast majority of working people who earn their livelihood either by brain or by hand. They have put us here to make


sure that our policy of redistributing the nation's wealth is carried out so that those who have the wealth see it transferred to those who have not.
That is our policy. That is what this tax is about. We welcome this tax, and we shall go out from this Parliament proud of our Front Bench and proud of the Treasury. That is not a view which is universally maintained, but certainly on this issue they have done a good job. We shall remember the snide innuendoes from the Opposition, made in a discreditable and disgraceful attempt to disgrace the Treasury Bench. We shall remember how that attempt was put down firmly by the united action of back benchers and the Treasury Bench.
We are here to see that Labour policy is put into action, and the Treasury Bench need be in no doubt that when Labour Party policy is put into action, Government supporters feel proud of them and will go out in the country to spread the message that the Labour Government are working to redistribute wealth. That is why we are here.

Mr. Hordern: I for one am glad to know why the hon. Member for Keighley (Mr. Cryer) is here, though his statement that the capital transfer tax was a splendid tax because it had appeared in two Labour manifestos was not a reason which I think would be shared universally. But it is the case that throughout the years Labour Governments have produced new taxes, additional taxes and even taxes which have not appeared in Labour party manifestos. One example was the selective employment tax. But I do not think anyone can claim rationally that the capital transfer tax is a good tax.
The hon. Member for Coatbridge and Airdrie (Mr. Dempsey) made a most striking intervention and raised a number of matters which his right hon. and hon. Friends on the Treasury Bench have been quite unable to deal with during the course of our debates in Committee and on the Floor of the House. Although the hon. Member for Llanelli (Mr. Davies) attempted in part to answer the hon. Gentleman's questions, his colleagues on the Treasury Bench failed to point out that the difference between the capital transfer tax and the estate duty is that,

when the capital transfer tax is payable, the capital gains tax is by definition payable as well, whereas with the estate duty there is no capital gains tax to pay. For that reason, it is impossible to say what the rate of effective tax will be in any given disposition. It depends on the value of the asset at the time and on the appreciation in that value at the time.
What is certain is that the capital transfer tax will be a very considerable burden on businesses both large and small, but especially on small businesses. Again, the Government have failed to deal with inflation. Here, this will be a most difficult matter if inflation continues at anything like its present rate of some 20 per cent. a year. If it goes on like this—I do not believe it can without a collapse—it means that the table in the Bill for the capital transfer tax will bite very hard indeed. Of course, the capital gains tax will also come into play. That will make life for small businesses almost impossible.
I give a practical example of what could occur from what the Chief Secretary has said. The right hon. Gentleman gave us an example of a business worth £250,000 which is given by the owner to his son. The capital transfer tax payable would be about £76,000. That could be paid over eight years. What the Government have failed to point out is that most businesses of that kind are incorporated. How are the assets to be produced to pay the tax? That can be done only by selling assets within the business. It is very difficult to understand how the business can continue if the plant and machinery is sold. I suppose that the money could be provided, if the cash were in the business, by paying higher dividends, but dividends are taxed at a very high rate. Similarly, if a loan were made by the company to the son to pay the tax, that would be accounted for as if it were a dividend payment. The fact that most small businesses are incorporated makes the position extraordinarily difficult. That is a practical point which neither the Government nor their supporters have taken on board.
The Chief Secretary and other Treasury Ministers have talked a great deal in comparing the capital transfer tax with estate duty. They say that there is now an opportunity of blocking loopholes and putting right the situation which has


existed for far too long. Estate duty has persisted in its present form for so long because previous Chancellors, both Labour and Conservative, have recognised what would happen if a capital transfer tax or a gifts tax were to be imposed. I do not know whether Sir Stafford Cripps or Mr. Snowden were Chancellors who were unwilling to raise taxation. I would not recognise them in that rôle. I am sure that in the past Socialist Chancellors have considered many ways in which taxation could be increased. The reason that they have not reverted to a capital transfer tax is probably that they recognise that the business of this country has been formed because of the existence of small businesses. What is likely to happen now is that the structure of industry and business will be affected by the capital transfer tax. It is difficult to know where the assets and resources are to be found to pay the tax. What is certain is that great difficulty will arise.

Sir John Hall: Perhaps my hon. Friend would like to deal with the position of a company which is assessed for capital transfer tax and capital gains tax combined. A company could be assessed for a figure in excess of the total value of its assets. How are those called upon to pay the tax to find the money.

Mr. Hordern: My hon. Friend is absolutely right. That is one of the great drawbacks of the tax with which the Government have persistently refused to deal. We cannot consider the capital transfer tax in isolation. It is a tax that must be considered in conjunction with the capital gains tax. That is something that the Government have persistently refused to consider. It is clear that small businesses will be greatly affected. The Government have given great attention to the position of those who own the businesses and we have paid a great deal of attention to the employers who will be placed in the difficulty of finding the tax. But what will happen to the employees in small businesses? There are no fewer than 6 million people employed in small businesses. That is a matter to which the Government have not addressed themselves.
There can be only one solution to the problem. In many cases the tax will not be able to be found out of the resources

of the businesses concerned. The only alternative will be to sell the business. Everyone knows what the position will be if the business is sold. It will be sold to a larger concern. The larger concerns will have much wider selection than before in picking out the small companies that they wish to buy and the price will in all probability be lower in consequence. It will not be a good bargain.
What will be the position of employees in these myriad businesses all over the country? The outlook is that the company will be taken over by a large concern. We all know from experience in our constituencies what happens when that kind of event takes place. The company loses its identify and direct contact with management, and employees lose the interest that they may have had in that company's direct success because they do not feel tied to the success of the larger organisation. They feel remote from the control. However successful that organisation may be in a general sense, the transfer of ownership and management to a remote centre will do great harm to the efficient running of a small business. This is a matter of grave concern.
The trend towards larger concerns has been going on over the last 10 years. Though it was popular at that time, I think that it is probably a mistaken trend. The trend towards large takeovers for the good reasons that have often been provided, such as economies of scale and so forth, have in retrospect largely been mistaken, and I believe that industrial organisations are finding that to be the case.
For example, one wonders whether Leyland Motors would have been greatly more successful had the merger not gone through. Leyland Motors in its old way was successful making buses, lorries, and some cars. In my view, that concern would have operated more successfully had it continued to act independently.
The result of large mergers and reorganisations in many companies has led to loss of identity which in turn has created great problems with the loss of management skill in being able to get through to the workers and, even more important, in the employees' ability to


get through to management and the people who can take decisions. The capital transfer tax will exacerbate this tendency. We shall find many small companies getting into the net of large companies. We should do our best to reverse that unfortunate trend.
In this morning's Financial Times I read an interesting article by Sam Brittan who was contrasting the position in this country with that in other countries of the trend of working people going towards non-productive jobs. He suggested that 29 per cent. of the population are now employed in either the Civil Service or local authorities and services. That is a higher figure than in any comparable country. That is another bad trend. It is a trend both towards large organisations and out of production into non-productive and Civil Service organisations of one kind or another.
The capital transfer tax will have unfortunate social implications as well. It would be wrong to leave this point without recognising the effect of capital transfer tax and the wealth tax, whenever the provisions are made known, combined with the capital gains tax.
9.15 p.m.
The future for small businesses is very bleak. I am certain that hon. Members on both sides of the House will have had letters from constituents, small businessmen, who now see the future in very bleak terms. I wish to quote from one such letter:
After years of study and then experience in the electrical industry I qualified for membership of the Association of Supervisory Electrical Engineers, now the Association of Supervisory and Executive Engineers. Now I am self-employed, having my own small business, and there are two factors worrying me.
Firstly, the measures designed with either malice or sheer ignorance to tax small businesses out of existence mean that I have now a powerful incentive to do what our enemies always accuse businessmen of doing—fiddling every penny possible. This I have never done in the past, having some respect for a system that seemed—if not quite fair—at least a reasonable compromise.
Colleagues who operate in Sweden tell me that the introduction there of extreme socialist measures similar to those now going through Parliament have resulted in the widespread growth of bribery and corruption. I can well understand this and unless there is some drastic moderation of the capital transfer measures

and of the obvious bias against small free enterprises which cannot easily be nationalised I shall consider I am justified … in doing everything I can to hang on to every penny I earn … I have been approached by Canadian, Australian and South African organisations which are actively encouraging entrepreneurs to quit the United Kingdom for a more invigorating atmosphere in their countries, and may yet follow their advice.
I am certain that many small businesses throughout the country have had a similar experience. This trend towards larger concerns will bring about massive unemployment, and the situation is already extremely serious.

Mr. Tomlinson: The letter which the hon. Gentleman just read is important, but it is equally important to hear how he replied to it. It is imperative that people who write that kind of letter should receive a lecture on law and order as it relates to tax evasion in the way that one hears one delivered in respect of so many other areas of policy.

Mr. Hordern: That intervention demonstrates the hon. Gentleman's attitude to this whole matter. The writer of the letter was not talking about evading taxation. There was no question of evading taxation under estate duty. Small businesses were properly able to make their own arrangements.
Unless CTT is modified, and unless the wealth tax is far less onerous than we apprehend, the future for small businesses will be extremely serious. Productive enterprises in this country will suffer greatly as the result of this tax. That feeling is shared by many people and many small firms throughout the country. This provision will be carried through at great risk of further unemployment, which is already serious, and at the risk of damaging the economy of the country.

Mr. Jim Marshall: My hon. Friend the Member for Meriden (Mr. Tomlinson) seems to have developed a habit this week—I do not know whether he acquired it in Committee upstairs—of prolonging the speeches of Conservative Members by intervening 30 seconds before they decide to sit down. I assure my hon. Friend that I may need his help on occasions, but I am certain that Tory Members do not need any additional inducement to take up the valuable time allotted to the House for this debate.
I propose to take up two points made by the hon. Member for Horsham and Crawley (Mr. Hordern). He referred to non-productive jobs in local government. I do not know to which jobs he was referring but, having spent many years as an elected local government member, I view that as a slur upon the hardworking individuals who are employed by local authorities. They are men of integrity and they work extremely hard, and the hon. Gentleman's language does nothing but denigrate them. I deplore slanderous language of that kind.
The hon. Gentleman also referred to small businesses, and I propose to say something about them. I am the Member for Leicester, South. As hon. Members probably know, Leicester is famed as a relatively prosperous city. That prosperity has been built up by small private firms.
Last Tuesday a delegation of Leicester hosiery manufacturers came to see their Members of Parliament about the capital transfer tax. I said that I would report their views to the Chancellor. I have not yet conveyed that information to the Chancellor. Leicester is fortunate in having three Labour Members of Parliament, for which my right hon. and hon. Friends are in debt to the wisdom of the electorate of that city. I may have referred to Leeds on one or two occasions. I am not a Member for Leeds although I spent some of my formative years there, and if I refer to Leeds it is due to my enthusiasm for that city.
I shall mention a few of the points which the hosiery manufacturers made to me. The Minister has to reply to the points made by other hon. Members and I hope that he will be able to spend a little time on the points I wish to put to him so that the potential fears of the hosiery manufacturers and their employees can be allayed. I shall mention five points. The first is that companies will sell out to larger companies, if possible, who will then rationalise and thus reduce employment. Secondly, companies will decide to reduce their scale of operations to reduce the amount of tax they have to pay. Thirdly, many companies will refuse to spend money on a dead duck; they will not invest in new machinery and there will be a loss of employment. Fourthly, owners will refuse to face the difficulties facing them and will go out of

business. Fifthly, many companies will not have sufficient finance and will simply fade away.
The Chief Secretary and the Financial Secretary have answered these points in Committee. I shall be grateful if they will indicate to the employers and employees of Leicester that it is the Government's intention not to reduce the level of employment in Leicester but to ensure that the present low level of unemployment will be reduced even further by their wise and commendable economic policies.
Having done my duty to my constituents I turn to Labour Party policy, because it is that policy which we are implementing in the Bill. I said on Tuesday that I fought two elections last year on this policy. It is our intention to redistribute not only income but wealth. This legislation is designed to bring that about. My hon. Friends do not intend to achieve that at the expense of employment, which lion. Friends opposite assert that the Bill will do—

Mr. Tomlinson: Not "hon. Friends please."

Mr. Marshall: I withdraw that slur on the character of my hon. Friends.

Mr. Watt: Would not the hon. Gentleman agree that the Bill will do precisely what he says it will not do—that is create unemployment—simply because it does not differentiate between those who will not and those who cannot pay the tax?

Mr. Marshall: I am sure the hon. Member knows the answer to that, which my hon. Friends on the Front Bench have provided ad infinitum. I refer him to the answer which already appears in Hansard this week. We are implementing Labour Party policy to which we are committed and we will ensure that it is implemented, we hope by Monday.
Only the unwise had to pay estate duty. I was delighted when the hon. Member for Cornwall, North (Mr. Pardoe) agreed with our policy and criticised us only for its lack of severity. It is good to know that Liberal Members support the Bill and will show by their votes that they want it passed as soon as possible. We must replace estate duty by a tax which is not paid only by the unwise. I and my hon. Friends support that aim.
I have put several points to the Ministers which were put to me by the Leicester deputation. If they can reply and give some assurance to the people of Leicester, I shall be greatly in their debt.

Mr. John MacGregor: It is as well that we have largely been free from the headline-seeking jibes and political antics of the Chancellor yesterday and have returned to the cold reality of some of the implications of this tax. There have been one-and-a-half speeches from the Labour side, which have conscientiously and fairly reflected many of our worries. The speech of the hon. Member for Coatbridge and Airdrie (Mr. Dempsey) was particularly telling, and it is a pity that the hon. Member for Leicester South (Mr. Marshall) did not stop when he had put his five telling questions.
As the Chief Secretary and the Financial Secretary know, we have had many debates over the last few weeks about the overall effects of this tax as well as its details. I want to use this opportunity to make one last attempt to put to the Financial Secretary what I think is the main thrust—to use his favourite phrase—of our concern about this tax, which has nothing to do with the preservation—as he would seem to put it—of the position of a privileged few, but has everything to do with the deeply damaging effects the tax will have on many aspects of the economy.
9.30 p.m.
I want to put my case as coolly and practically as possible, without emotional or philosophical overtones, so that the Financial Secretary can try to answer my points at the end of the debate. He has signally failed to do this so far.
The Government have always concentrated, to date, on the total wealth of the transferor or transferee. However, it seems that throughout all our debates the Financial Secretary and the Chief Secretary have totally failed to distinguish between free assets—such things as houses, marketable stocks and shares and other personal assets—and assets which are tied up. I want to concentrate on that matter.
Regarding free assets, I suppose that it could be argued that individuals who are

in the position of having totally free assets will not be severely affected by this tax because they will spend those assets during their lifetime. Indeed, I thought that a cartoon that I saw recently fairly aptly summed up the sort of situation that we shall see in solicitors' offices on the many occasions when wills are read—that the deceased had quite substantial assets not very long ago, but, being of sound mind, he had spent them. In this situation, therefore, it could be argued that the only people who will suffer will be the successors of those individuals.
I leave aside the argument that there is a general effect on the economy in the sense that savings will be severely affected, particularly when one takes account of the other capital taxes and the very high rates of taxation on savings income nowadays. We have heard those arguments many times and I shall not elaborate on them now, because I despair o; ever getting the present Government to see the point.
I want to return to the situation in which the assets are tied up. It is here that the economic effects come through—to the farms and the firms. I should still like to know what representations the Ministry of Agriculture has put to the Treasury about the effects of this tax on farming. But I deal now with the situation in regard to firms.
There are three arguments to which we have still not had satisfactory replies. The first is that in these situations the assets themselves are tied up. In other wards, they are not free to be spent by the family. The second argument—this has been brought out time and again in this debate—is that there is a genuine problem about where the money will come from to pay for this tax. The third argument is that it will have severe economic and employment effects in many areas, to which we have drawn attention time and again.
I am sorry that the hon. Member for Llanelli (Mr. Davies) is not in the Chamber at present. As he usually does, he made a very fair speech. He said that the tax, particularly on lifetime gifts, was not unduly onerous up to total assets of £100,000. Thanks to the concession which we obtained in Committee about lifetime gifts and the halving of the rates up to that point, it could be argued


that that is so; although, as we have constantly pointed out, the levels of tax, even up to £100,000, are much greater here than in most other countries. However, I am concerned about the situation above the £100,000 point. This matter was not brought out by the hon. Member for Llanelli.
First, after the case where the total assets of the firm, let us say, are more than £100,000, the tax rates start to rise very steeply indeed. Second, at current rates of inflation increasing numbers of small businesses will be moving into the £100,000 position. Third, at current rates of inflation the houses and other personal assets of the owners concerned will have to be added to the assets, and that will immediately put up the tax rates on the business. Fourth—the most important point—we are talking about small businesses and private companies.
It is worth bearing in mind that it is the firms whose total value is well over the £100,000 mark—I shall come shortly to a £400,000 illustration—which are the major employers of substantial numbers of people. The very small businesses, shops and so on, up to the £100,000 mark are, by and large, not big employers, taken on their own. But firms above that level often employ substantial numbers of people and are the main employers in many of our smaller towns and villages.
The £1,000 annual exemption can easily be exaggerated. I believe that the hon. Member for Llanelli said that there was a Government amendment which would enable that exemption to be rolled over. As I understand the amendment, the rolling over is for only one year. We welcome the concession, but it does not have the implications that the hon. Gentleman suggested. The other point about the £1,000 exemption is that in the early years of the build-up of a firm, or when the owners are younger, they will not want to use the concession year by year.
The real point, however, is that the capital transfer tax rates, even on a business worth up to £100,000, must be added to the other capital taxes. It is the accumulation of different types of capital taxes which will cause the biggest damage. We now learn that the Government are to bring back the capital

gains tax on top for the transfer on death.
The answer to the hon. Member for Meriden (Mr. Tomlinson), who put his case fairly, is that he may well be right about many businesses worth up to £100,000 but that there are all the other effects. We are particularly concerned with the smaller and medium-sized private companies valued well above that figure.
The point was brought home to me one evening in Standing Committee. I am glad that the Financial Secretary is to reply, because he will recall that I raised the illustration of a company worth £400,000 and pointed out the cumulative effect of capital transfer tax and capital gains tax on the original transfer, which I put at 100 per cent. in that case. I also said that if assets were realised to pay the tax, if they were available to the transferor or transferee elsewhere, capital gains tax had to be paid on those assets.
I shall not give the figures, because I do not want to quote too many, but the figures on those facts were horrifying. The hon. Gentleman said at that time that I had taken an extra example, and that he would put forward a more realistic and reasonable example.

Mr. Maxwell-Hyslop: There will be larger firms which will buy them to close them, in order to get rid of the competition.

Mr. MacGregor: I was about to come on to that point. Even where businesses can find a willing buyer, there will be implications of the sort my hon. Friend has mentioned.
But there will be other implications. The large public company, which will be the normal buyer in such situations, will often be looking for different rates of return on capital from those that the family business would be prepared to accept. If the family businesses are small and in peripheral areas, they will be less likely to give proper top management time to them. Therefore, the large firm may often run down the business, or simply eliminate the competition. Therefore, the situation will arise where, in times of economic stagnation or squeeze on profitability or cash flow, such as we


now have, parts of the larger organisations will be vulnerable in a way in which they would not have been in if they had remained in private hands and control, and therefore that will immediately have implications for local economy and local employment.

Mr. Crawford: Does the hon. Member agree that many of these small peripheral companies which will be taken over will be in Scotland and Wales?

Mr. MacGregor: I, too, am a Scot and, as I have told the hon. Member before, he must not be too partisan. There are many parts of England, including in my own constituency, where this effect will be felt, but I take the hon. Member's point that the provision will very much affect Scotland and Wales.
Another alternative is to find another private buyer. But again, knowing that he will eventually have to meet the heavy CTT and capital gains tax burden himself in due course there is no incentive for another private buyer to take on that extra burden knowing that little will come out of it. If the owner cannot find a buyer he will be unable to sell the business intact. The view may be taken that it is worth little and could therefore be pased on to the next generation at that price. However, since the business will be valued on the assets price the only way to meet the situation in which he wants to sell but cannot do so will be to break up the assets, with the consequential adverse effect that will have on local employment.
Another possibility is that the business may be run down and parts of it sold off to meet the tax. Perhaps it would be run down so that the owner could enjoy the fruits of his earlier labour in the knowledge that he would face a smaller tax bill in the end. There is therefore an element of the geriatric charter in the capital transfer tax. It is certainly correct to say that it will act as a disincentive to new investment in firms and farms. It will act as a disincentive to building a business up and it will have dangerous effects on employment.
I make one final plea to the Financial Secretary and the Chief Secretary to accept that there is a genuine argument that, with the higher rates on firms or

farms where the assets are tied up and worth a fair amount of money, and where at some point because of the high rates of tax, the assets will be culled, there will be the most severely damaging economic effects.
I am all in favour of reform of capital taxes and I favour a great spread of wealth. I am strongly in favour of equality of opportunity, although I believe that part of the incentive to build up from that must be that it is possible to pass on a reasonable amount of the capital one has built up to one's children and future generations. In its present form, the capital transfer tax will have the most adverse effects on businesses and farms. If the Government are intent on introducing the capital transfer tax, as they obviously are, surely it is not beyond the wit of man to devise one which will take account of the situations of businesses and of farms.
On this account alone, the capital transfer tax is a devastating failure, hence our critical objections to it. It would be an advantage if we were considering much wider reforms of capital tax generally which would bring us more into line with other countries. In our debates we have considered the situation abroad a great deal. The more I look at the situation in Europe, the more I see a case for speedy harmonisation of taxation both of company and of personal taxation, certainly while this Government continue on their merry way.
Short of starting afresh with capital transfer tax and capital taxes generally, it seems to me that some of the amendments which are being put forward in this group would at least help to diminish the worst effects of the Bill on the businesses I have been describing.

9.45 p.m.

Mr. John Golding: Tonight's debate, like the debate on the Finance Bill generally, shows that the subject under discussion is one of the two great subjects which divide the two sides of the House. Issues that always divide us are the distribution of power and the distribution of influence. Another, which we are now debating, is the distribution of wealth. One of the reasons that I have spent my working life in the trade union movement is that I was persuaded at a very early age that there was


a great maldistribution of wealth. It was not that I subscribed to the politics of envy although I could not help sometimes being envious of those very much better off than I was; and I could not help but feel sorry as a child for those children who were very much worse off than I was.
I will not pursue tonight the politics of envy. This is an issue which is of very great concern to many of us. Before underlining why I feel strongly in favour of the introduction of capital transfer tax, and why I feel the Government have erred on the side of generosity, I suggest that the argument about the small business is one which has to be answered because if it were true that this tax would lead to reduced incomes for working people and reduced employment for them, I would listen to that argument very carefully.

Mr. Nicholas Winterton: It will.

Mr. Golding: The hon. Gentleman says that it will but my guess is that the argument is evenly balanced because in my experience—

Mr. Winterton: What scales is the hon. Gentleman using?

Mr. Golding: The hon. Member for Macclesfield, as usual, acts in a discourteous way. I look to you, Mr. Deputy Speaker, to ensure that there is no shouting from a sedentary position.

Mr. Deputy Speaker (Mr. Oscar Murton): I will protect the hon. Gentleman if it proves necessary.

Mr. Golding: The argument is evenly balanced because it has been my experience from observation that whereas some small businesses have brought advantages to our economic life, there is an argument that should be carefully considered that the rôle of the small business in British industry has been to minimise production, that the small business epitomises at the present time the lack of investment that has taken place in British industry and that it is in the small business that one finds inefficient, outdated methods and the second-generation inefficient management that has been so harmful to British industry.

Mr. Lawson: How does the hon. Gentleman square the comments he is making with the findings of the Bolton Committee on Small Businesses, which showed that the small business sector as a proportion of the total economy had declined faster in this country than is the case with any of our major competitors?

Mr. Cormack: The hon. Gentleman has never heard of it.

Mr. Golding: Of course I have heard of the Bolton Committee Report. I was involved as PPS in the then Department of Technology as far back as 1969 when this subject was a matter of great concern. From my observation, bad pay is to be found in the small business and bad working conditions are to be found in the small business. If one wants to find the cowboys in the road haulage business one looks to the small road haulier. If one wants to find the most foul conditions in foundries, one looks at some of the small foundries. In North Staffordshire if one wants to see the worst conditions one goes not to Wedgwood or Doulton but to the very small potteries.

Mr. Watt: Does the hon. Gentleman claim that the strike records of small businesses are worse than those of big businesses?

Mr. Golding: I would certainly compare the strike record in Wedgwood with that of any of the small potteries or brickyards in North Staffordshire. I have no precise figures, but from my own knowledge workers generally are happier in my locality with the larger than with the smaller employers. The advocates of the small business will have to work hard to persuade me that the death of the small business would be harmful. I do not bemoan the loss of the small shopkeeper. I prefer to shop at the large co-operative store rather than at the corner shop.
The nub of the argument is not the small business but the distribution of wealth. In a letter that was quoted earlier, a most revealing phrase was used—"every penny I earn". The money that goes into the pockets of many business men has been earned not by their efforts but by the people who work for them. If the distribution of income was fair and rational there might be a case


against a capital transfer tax, but anyone with eyes to see knows that the distribution of income is unfair.
There is no way in which one can demonstrate that the rich have earned their money in the way that the baker, the miner or the engineer has earned his money. A great deal of wealth has been inherited. In no sense can it be said that those who have inherited wealth have earned it. The inheritance of wealth is a fortune of birth.
The Opposition are defending the unjust distribution of wealth. Many rich people have gained their wealth from speculation or from gambling. Speculation is a form of gambling. There can be no moral justification for the wealth that some people acquire. Those of us who defend the capital transfer tax say that it is only right that the wealth that has been acquired in this haphazard and unjust way should be redistributed. I feel as though I am living in a different world—[HON. MEMBERS: "You are."]—from that of Opposition Members when they say that the first £100,000 is not too bad but that it is after that that the injustice comes. Of course I am living in a different world. The constituents I know best do not have £5 in the bank after Christmas or following their holidays.

Mr. Winterton: They spend it. That is half the trouble.

Mr. Golding: The hon. Gentleman said that they spend it. Their average wage amounts to £50 a week before tax. It means that in a year they will earn at most £2,000. Over a lifetime those earnings amount to roughly £80,000. That is the sum Conservatives should be doing. The people I represent will earn only £80,000 during a lifetime of work. It is nonsense for the Opposition—rich, affluent, privileged—to scoff at my constituents who are broke after Christmas or after their summer holidays and who have no savings at all.
Many of my constituents who work in the potteries, electrical component factories, down the mines or in bakehouses have to think twice about going on strike for three weeks because they have not the capital resources to last them for that time. They have little share in the wealth

of the country. Therefore, it does not become Conservative Members to scoff at the fact that those workers have so small an amount of savings from their earnings.
If one sees those men working in their bakehouses, in the potteries, in the mines or at conveyer belts, one does not take the view that they do not work hard to earn their money. Of course they do. If one goes into a classroom and sees a teacher one knows that she too works hard to earn her money, and yet at the end of the year she has little left to invest. Compare that situation with the situation of the bookmaker, the stockbroker or the barrister.

Mr. Brian Sedgemore: Oh!

Mr. Golding: My hon. Friend the Member for Luton, West (Mr. Sedgemore), who has belonged to that privileged group, will appreciate that in no sense did he earn so much more than the miner, the engineer or the factory worker. What he can say is that he received more and that his income was greater. I am sure my hon. Friend has never earned in any real sense more than the faceworker or the car component worker in my constituency. It has been a matter of luck that his standard of living has been so much greater than that of so many of my constituents. I cannot accept the Opposition's argument that the money which some people have earned should be kept and not taxed, because they did not earn it in the first place.
It is very important at the present time—indeed, at all times—that the distribution of incomes should be fairer. I find it repugnant to have to face constituents who have not enough to live on. We all have constituents trying to live on £18 to £20 a week from social security. We are discussing whether the edge can be taken off that poverty at the expense of richer people. The issue is whether the poor should benefit at the expense of the better-off.
10.0 p.m.
The wealth referred to by the Opposition means not only income but also security. They demand for themselves and their kind massive security compared with the lack of security experienced by many of my constituents, who cannot face old age with a feeling of security since


they have no savings. Although the Opposition may say that our people have spent it, they do not realise that men and women retiring today at 65 have received low pay during much of their lives and have not had the opportunity to save.
Wealth and title are possessed by a few people who can face a secure future. The Opposition, their class and their kind benefit from the poverty of the people I represent. That is the nub of the argument. That is why it is important for the Government to proceed with the capital transfer tax. My only regret is that the tax is not severe enough. When I hear the Opposition say that the tax is not too bad up to £100,000, my immediate reaction is that that means that the tax is not severe enough.
Referring to the figure of £80,000, if that is the total wealth which one of my well-paid constituents can earn in a lifetime—does the hon. Member for Macclesfield (Mr. Winterton) wish me to give way?

Mr. Winterton: No. I want the hon. Gentleman to finish his speech.

Mr. Golding: I should be grateful if the hon. Member would stop being rude. He is shouting once again from a sedentary position.
This is what we expect from the Conservative Party when it is faced with a Government measure to bring about the redistribution of wealth for which we have worked so hard. The possession of wealth has not only meant that the Opposition and the class they represent have enjoyed greater security than that enjoyed by the people I represent. The possession of wealth has also given them greater privileges in respect of health, housing, education and power.
We have a situation where there are still two nations in this country. There are still clearly defined rich people who are over-privileged and who take more than their fair share. There are others—the great majority, as my hon. Friend the Member for Cannock (Mr. Roberts) reminds me—who are distinctly underprivileged in every way.
The only way in which the Labour Party can tackle this problem is by taking the wealth and the privilege away from those who have them and transferring

them to the vast bulk of the poor working people of the country.

Mr. Gwilym Roberts: I have been following my hon. Friend's argument closely. It is a very simple argument—[Laughter.] Opposition Members appear to find that funny. If, like my hon. Friend and myself, anyone has lived on that side of the fence, it is a simple argument. For anyone who has not lived on that side of the fence, it is far more difficult. Naturally, I sympathise with what my hon. Friend is saying. However, he has not made one important point, and I am sure that he will wish to develop it before he concludes his remarks—

Mr. Deputy Speaker: The hon. Gentleman appears to be beginning to develop it himself in what is becoming a very long intervention. Mr. Golding.

Mr. Golding: rose—

Mr. Roberts: I was just developing the point which I hoped that my hon. Friend was about to make.

Mr. Deputy Speaker: I am sorry. I misunderstood the hon. Gentleman. May I suggest that he does so quickly.

Mr. Roberts: My hon. Friend rightly said that one of the arguments related to giving the poor some benefit by taking away from the overprivileged section of the community. In addition there is an enormous benefit to be obtained in terms of the feeling of justice which it produces in our society. One of the great things operating against the effectiveness of our society is the injustice of society in the sense of injustice to working people, and this tax will make an important contribution towards reducing that.

Mr. Golding: It so happens that I was about to deal with that after making one or two further points. My hon. Friend's argument is a very good one. It has been one of the very great difficulties for Governments in this country since 1945 that appeals for restraint have generally had to be made against the background of conspicuous expenditure on the part of very many people in our society. Whether it be 1948, 1968 or 1975, it is very difficult for a Government to ask working people to restrain their expenditure when they see others living in conditions which are very much more comfortable than their own.
I do not believe that the argument of initiative carries very much weight in our society. It seems to me that, generally, the position to which we get in life is determined by—[Interruption.] I do not know whether you wish to call the Opposition to order, Mr. Deputy Speaker. I was tempted to talk of one-sided deafness.
I have never been persuaded of the argument that how far an individual progresses in life in this country is due to the amount of personal effort or initiative that he puts into his career. It seems that very much more important in our society is how much an individual has when he starts life. It seems that success is more dependent on the starting point than on the effort that the individual puts into his career. Basically that is unfair.
Many Conservative Members and the people they represent would have made a greater contribution to society had they not been given so much to begin with, had they not had handed to them a privileged place in our society. If they had not started life in that way they would have had to work very much harder and develop much more talent to arrive at the position that they now occupy.
It could well be argued that by taking privilege from individuals at an early age we shall get from them greater effort and greater achievement than we have seen so far. I apply that argument to the family business. A young person going into a public company is likely to exert far more effort and is likely to show much more initiative if his or her progression through the company is dependent upon effort and initiative. Such people will demonstrate much more initiative than those who have been given the golden pot and who are free to fritter it away.

Mr. Gwilym Roberts: Does my hon. Friend not agree that one of the great arguments of the Conservative Party—that concerning the initiative and drive that is shown by the founders of small firms, such as people who have built up their businesses and achieved considerable success—can be applied to the effect of this legislation, which is to put more people in a position which is so prized by the Conservative Party? Does my hon. Friend agree that from that point of

view this tax makes a useful contribution to our society?

Mr. Golding: I would ask my hon. Friend not to intervene so often. I was just coming to that point. I was brought up in an area where it was believed that life was rags to riches to rags or clogs to clogs in three generations—

Mr. Ian Gow: On a point of order, Mr. Deputy Speaker. Under Standing Order No. 22 is it not out of order for an hon. Member to persist in tedious repetition of the same argument?

Mr. Deputy Speaker: That is a matter for the Chair to decide, and it will be decided.

Mr. A. J. Beith: Further to that point of order, Mr. Deputy Speaker. Would it be possible, without entering into the argument about Standing Orders, to draw to the attention of the hon. Member for Newcastle under-Lyme (Mr. Golding) that many amendments—many of them are Government amendments—will not be discussed if he continues in this manner?

Mr. Golding: I am aware that the Liberals, like the Tories, are trying to defend the distribution of wealth. They will try to prevent this discussion from continuing. I think that it is an important debate which should be continued. Were it not for the Whips on the Front Bench nodding, I would continue it. But, having seen the presence of the Deputy Chief Whip and having had some experience of what that means, I would simply urge the House to vote with gusto for the Government legislation.

10.15 p.m.

Mr. Fairbairn: I want to make the briefest of interventions. I wish to draw the attention of the House to the schizoprhenia which is normally displayed on the Government benches. I have never come across a more glaring example than that which we have just heard from the hon. Member for Stoke-on-Trent—

Mr. Golding: On a point of order, Mr. Deputy Speaker. I think that in North Staffordshire it is well known that Newcastle-under-Lyme is a posher part than Stoke-on-Trent.

Mr. Fairbairn: The Government say that they are interested in better industrial relations, efficiency and investment in industry. This tax on businesses and farms will lead to bigger organisations, worse industrial relations, less efficiency and a sapping of investment.
One hon. Gentleman said that the ordinary working man cannot distinguish between capital and income. The Labour Party pretends that it is interested in the human being. This tax will destroy 10 million employed human beings in this country. I believe that is what it is intended to do. Let no one, particularly those who sit at the west end of the Chamber, doubt that when it happens their hypocrisy and derision will come back in their own faces.

Mr. Sedgemore: Having heard the briefest of interventions, I can say that it shows how one can be brief and wrong at the same time.
I think that hon. Gentlemen opposite must sort out whether they are or are not in favour of capital taxes. The hon. Member for Norfolk, South (Mr. MacGregor), who is not in his place, told us that he was in favour of capital taxes. Indeed, upstairs in Committee we heard other hon. Members say that they were in favour of capital taxes. But of what capital taxes are they in favour?
I should like to quote the words of one of the more revered Members of this House who, speaking of a certain capital tax, said:
Many will mourn the passing of the loopholes more than those who will mourn the passing of the estate duty. What was so admirable about estate duty was that it was not always necessary to pay it. … The great virtue of estate duty was that it was very often avoided. That seems to me to be the reason why it survived for so many years and grew into a state of respect, if not affection, among so many people. I gladly join in the tribute to the Estate Duty Office. I am certain that the officials there are as sad as the vast majority of people in the country that this admirable tax is now passing from us".—[Official Report, Standing Committee A, 18th February 1975; c. 2237–8.]
It seems that in the end Conservative Members will come to love CTT in the same way as the hon. Member for Cirenceter and Tewkesbury (Mr. Ridley) came to love estate duty.
The House of Commons is basically a happy place, but a tear came to my eyes

as I listened to the hon. Member for Horsham and Crawley (Mr. Hordern) telling us about patriotism and developing it as a theme in relation to this clause and CTT. A similar theme was developed in Committe upstairs, and the hon. Gentleman this evening read a letter to show how delicate a flower patriotism can be with his kind of people.
There seem to be a large number of people in this country who are playing this never-ending game of monopoly. They are for ever moving blocks of wealth and capital and capital into and out of Kruger-rands, into and out of real estate, into and out of hotels and when they fail they write a letter—

Mr. Gwilym Roberts: Does my hon. Friend agree that CTT will be a stimulus to patriotism? These people will feel that they are making a greater contribution to the nation and to the working people whom my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding) mentioned.

Mr. Sedgemore: I agree with my hon. Friend that this tax is a genuine test of patriotism, but it seems extraordinary that when these people have moved blocks of capital into and out of this sort of income for the purpose of tax avoidance and tax evasion they write to the hon. Member for Horsham and Crawley, and when that fails they decide to take themselves off to the Channel Islands or some rat-infested swamp which serves as a tax haven in some curious part of the world.

Mr. Ian Lloyd: Within these limits of condemnation, what degree of discretion will the hon. Gentleman give to the managers of trade union pension funds?

Mr. Sedgemore: One of the best things we can do is to ensure that they get their £10 million as rapidly as possible.
The other thing that disturbs me is the ingratitude of Conservative Members for the unfailing efforts of the Chancellor of the Exchequer, the Chief Secretary, the Financial Secretary and other spokesmen from the Treasury to try to meet their needs. Tory Members make these proposals and ask for reductions and concessions, and when they get them they complain that they are not enough.
I want to raise one serious constitutional point about the operation of CTT in


respect of this clause and in relation to the changes that have been made. I do not go all the way with the hon. Member for Cornwall, North (Mr. Pardoe) in claiming that the whole apparatus of Government in this country is rotten and in need of reform, but there is something slightly strange about the way in which we have introduced this amendment.
It was many months ago that we published a White Paper in which we set out the rates of tax which eventually appeared in Clause 35. The Bill was then published, and we had plenty of time to look at it. There followed a Second Reading debate, and there were no complaints from the Government benches about the rates in Clause 35. The House went into Committee and debated Clause 35, and I believe that my right hon. Friend the Chancellor of the Exchequer was involved in that debate on the Floor of the House. There was a long discussion about the merits and demerits of CTT in relation to the rates in the Bill, and we agreed them. Then we went into Committee and for 60 hours every speech made by Government spokesmen defended the rates of tax in the Bill.
Suddenly we find bits of paper on our desks telling us that rates of tax for transfers in life up to £100,000 are to be halved and that the rates are to be cut by one-third for transfers during life up to £250,000. Even with my admiration for the Treasury Front Bench team and for the civil servants—I speak as a former civil servant—this seems to be an extraordinary way to run a country.
Why did this come about? Was it because the Chancellor, the Chief Secretary and the Financial Secretary decided that the rates had been pitched too high? I do not believe that it was. Or was it related to the threat by the right hon. Member for Finchley (Mrs. Thatcher) that she would repeal this tax? We all know that that is an idle threat. It is easy enough for Opposition spokesmen to tell us that they will repeal this or that tax. When the crunch comes, the Treasury never repeals these taxes. Somehow income tax did not disappear and I very much doubt whether capital transfer tax will disappear.
What is the effect of the right hon. Lady's threats on the sensitive minds of

the Revenue officials? They might conceivably argue that if she really means it people will not make transfers of capital in life and therefore the Revenue will suffer. If those officials are unpatriotic, they may also say that it is conceivable that the Labour Party will lose the next General Election. The combination of the right hon. Lady's threat, the insensitivity of the Revenue and the lack of common sense in believing that it is a genuine possibility that Labour will lose the next election might be the real reason for these tax reductions.
In that sense some of us are worried about the scale of the reductions. I shall not vote against the Government tonight because I believe that we should show our good faith towards small shops and businesses, small farms and the like. We should say that we are prepared to give this a try. If, once the tax has settled down and people start to pay it and are not encouraged to adopt Poujadiste excesses, we can raise the rates to appropriate levels.
It is a pity that Conservative Members have used this harum scarum, hocus pocus nonsense about the effect of this tax on small shops and businesses. It does not behove them to create panic and carry on with these scare tactics. On Monday I told the House that I had received one letter objecting to the capital transfer tax. As a result of the hysterical pressure of Tory Members this week, I have now had another letter objecting to this tax. My hon. Friend the Member for Bolsover (Mr. Skinner) is right when he says that this exercise is part of the virility symbol of the right hon. Member for Finchley.
I see that the hon. Member for Blaby (Mr. Lawson) is about to leave the Chamber. Before he does, may I say that the contortions—the hon. Member has come back. May I say that even a second's absence is too long for all of us. The hon. Member's remarks on this tax have summed up the contortions and distortions that have gone on about its effect. I distinctly remember his telling the House on Second Reading that this tax would lead to a Marxist State. In Committee I heard him say that the tax would mean that every small business would be bought out by Arabs and Americans, thus, presumably, developing


the capitalist State. It is that sort of nonsensical dialectic in the hon. Member's mind which brings the House into disrepute.

Mr. Lawson: I am grateful to find that the hon. Member listens to my speeches with case. If he had listened with more care he would know that my thesis was that, although the intention, which I queried, was to create a Marxist State, the result would be that the conglomerates and the Arabs as well as the

Secretary of State for Industry would take over the small firms which are the backbone of British industry and the British economy.

Mr. Sedgemore: I am sure everyone will realise that this tax is an important step towards the irreversible shift of wealth and power which we have promised the electorate and which the electorate so desperately want. We regard it as a modest measure on the road to Socialism.

10.30 p.m.

Dr. Gilbert: Not for the first time, I am in the difficult position of having to resolve the problem of not trespassing on the time of the House and yet at the same time not, unintentionally, failing to refer to any of the speeches which have been made.
Without going into detail on all the points raised, I would say that certain themes have come through clearly in the debate. First, many of the examples put to us by hon. Members opposite have assumed, as is perfectly proper for debating purposes, extreme situations—small businesses with no assets outside their business or businessmen who had taken no previous steps to mitigate the possible incidence of capital transfer tax. If all those assumptions were true in any one case, of course the effects on the business concerned would be far worse under estate duty than that under our proposals. That is a fact which Conservative Members have been unable to deny. The more fair minded of them have recognised this. I am sorry that the hon. Member for Norfolk, South (Mr. MacGregor) is not in his place. He made one of the most reasonable speeches here, as he so frequently did in Committee, and I am sure that he would be one of the first to recognise that.

Mr. Pardoe: Hear, hear.

Dr. Gilbert: I am grateful for that agreement.
I recognise that many Conservative Members have legitimate concern about the whole array of capital taxes existing and proposed. That is why the House has set up a Select Committee to consider the wealth tax. Its terms of reference enable it completely to review the incidence and interaction of taxes now on the statute book and those contemplated for the near future.

Mr. Peter Rees: Do I take it from the hon. Gentleman's remarks that it is within the Select Committee's terms of reference to recommend the repeal of capital transfer tax should it not fit in easily with wealth tax?

Dr. Gilbert: It is up to the Select Committee to take into account the interaction of the whole structure of capital

taxes. I understand that its remit is quite wide.
The whole problem—I am sorry that I do not see the hon. Member for Basingstoke (Mr. Mitchell) among us—

Mr. David Mitchell: rose—

Dr. Gilbert: I beg the hon. Gentleman's pardon. I am glad to see him.
My main text tonight would have served as the text for my hon. Friends the Members for Newcastle-under-Lyme (Mr. Golding) and Luton, West (Mr. Sedgemore). It is true, of course, that one does need a text. I took down most carefully the words of the hon. Member for Basingstoke. They are akin to the words of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley), which were quoted by my hon. Friend the Member for Luton, West. The hon. Member for Basingstoke said that most people did not pay estate duty and that most small and medium-sized businesses did not pay tax. I gather that it is suggested that I have admitted that. I do not know whether that is the right verb to use. I certainly said that I never conceived that estate duty was a totally avoidable tax—I have made that quite clear—otherwise the Treasury would not have benefited from the yield it has had from the tax down the years.
What I said about estate duty was that it was largely paid by the unlucky, the ungenerous and the unwise, and that I could not see that that made a foundation for a fiscal system which would commend itself to reasonable men, whatever their political philosophies. Again, I am glad to see that some of the more enlightened Opposition Members are acknowledging that, though, despite the reassurances from the right hon. and learned Member for Surrey, East (Sir. G. Howe) and some of his hon. Friends that the Conservative Party is now unequivocally in favour of a tax on lifetime transfers, I am sure that he will have difficulty in persuading all of his hon. Friends to join him in support of that general principle.

Mr. Ian Lloyd: On the point about the unlucky, the ungenerous and the unwise, the Financial Secretary will be aware that the tables of the Inland Revenue published every year show the


figures for the payment of estate duty over the whole range of estates, over a complete distribution. These tables show that several hundred millions of pounds were paid in estate duty last year over a wide range of estates. Is the hon. Gentleman saying that all these people—and there are many thousands of them paying sums varying from a few hundred pounds to millions of pounds—are either ungenerous, unlucky or unwise?

Dr. Gilbert: I would say that they were one of those three, if there were so many others who could have avoided paying it altogether. I am glad to have the acknowledgement of the hon. Member for Basingstoke. I hope that the hon. Gentlemen will communicate with each other and resolve their problems. The view of the hon. Member for Basingstoke was that most people did not pay estate duty.

Mr. David Mitchell: Rubbish.

Dr. Gilbert: I hope that the hon. Gentleman will not say "Rubbish" when it was he who said it.

Mr. Mitchell: I think that the word I used was "many", but I accept the Minister's thesis.

Dr. Gilbert: By all means. I do not go as far as the hon. Gentleman. I accept what the hon. Member for Havant and Waterloo (Mr. Lloyd) said—that the revenue from estate duty was considerable.
But the fact remains that it has been possible for many years for those who are well advised in these matters and who have the funds at their disposal to hire the best advice to be able to arrange their affairs so as to attract virtually no tax in the transmission of inherited wealth from generation to generation. As my hon. Friends have pointed out many times during the debate, that is what the capital transfer tax is all about. It is to bring a basic fairness into our tax system, to reduce the rates of estate duty, and to make sure that transmissions of wealth, however they occur—whether of free assets or settled property, or whether the discretionary trust is used or some other form of trust instrument—are taxed in the same way as they would be if those

assets were kept free from arrangements or settlements.
There have been many suggestions from Opposition Members that my right hon. Friend the Chief Secretary and myself, with my right hon. Friend the Chancellor, are deliberately setting about a course of trying to destroy small businesses. That, of course, is a preposterous accusation. [HON. MEMBERS: "Oh!"] Of Course it is. Hon. Members of the Opposition know better than that. I accept the hyperbole of debate. I am quite prepared to stand here and take the hyperbole seriously and deal with it in a moment.
If we were persuaded that the rates of tax were such as to lead to serious difficulties for small firms or lead to unemployment, of course we would look at them again. But my right hon. Friend and I are persuaded at present of nothing of the sort.

Mr. David Mitchell: I hope that the hon. Gentleman will not fail to reply to the question which has been repeatedly posed from the Opposition side, and was posed by the hon. Member for Coatbridge and Airdrie (Mr. Dempsey)—where is the money to come from to pay the capital transfer tax on a company valued at £100,000 or £200,000?

Dr. Gilbert: I was about to discuss the three general types of business which one may encounter. First, there is the unsuccessful business, which, almost by definition, will have no tax problem because its assets will not be growing at a great rate, so that the higher rates of capital transfer tax will not apply to it. Then there are two other types of business—the successful business which is growing very fast and is ploughing back all the money into the business, and the successful business which is not growing all that fast but is taking money out by way of dividend or payments to the proprietors, however it may be done.
For the third type of business, almost by definition there is virtually no problem because, in the situation I posed, there will be a constant flow of free assets into the hands of the owners of the business.

Mr. Anthony Nelson: Is the hon. Gentleman suggesting that the tax liability can always be met out of


the yield on capital employed in the company?

Dr. Gilbert: It depends on whether the business is successful. We had these discussions in Standing Committee at great length. I should have thought it self-evident, and we had various examples given in Standing Committee. If businesses have been making considerable profits such as we are talking about and have then been distributing them, it will be quite possible for the owners to pay the capital transfer tax out of that [HON. MEMBERS: "Oh."] All right. Hon. Members say that that is madness and that no one can accumulate capital in that way. All I can say is that if that is the case, we come back to what we were saying last night, that if it is impossible to accumulate assets in that way, and it is impossible to accumulate substantial amounts of wealth in that way, it follows that substantial amounts of wealth must have been inherited. As my hon. Friend the Member for Newcastle-under-Lyme said, it depends where one starts.

Mr. Nick Budgen: What about the effect of price restraint?

Dr. Gilbert: We are talking about small businesses. I am sure that the hon. Gentleman knows all the details of price restraint.

Sir G. Howe: Is the hon. Gentleman saying that small businesses are exempt in terms of the price code? The methods of surveillance may be different, but the burden of the price code is just as severe on businesses of the kind we are now discussing as it is on others, and the Minister must not seek to conceal his own ignorance of the problems with which he is supposed to be dealing.

Dr. Gilbert: It is absurd—the right hon. and learned Gentleman knows it—to suggest that the burden of price restraint is as heavy on small businesses as it is on large. He is well aware of that.

Mr. Hugh Fraser: With a 20 per cent. rate of inflation, for most companies the replacement of assets means that they are on a negative cash flow. Unless one earns more than 30 per cent. after tax, one is on a negative cash

flow. It is the incompetence of the present Government which has organised the 20 per cent. rate of inflation, which must, in these terms, be ruining every company in the country.

Dr. Gilbert: Successful companies—we have been talking about successful companies—are coping successfully with the rate of inflation. Of course they are. I recognise, as I have said throughout, that at a time of rapid inflation the operation of the capital gains tax can be an additional burden. The Opposition should not abuse us about that, because they did nothing about the rate or structure of capital gains tax when they had the opportunity.

10.45 p.m.

Mr. Tomlinson: Many serious questions were asked from the Government back benches. My hon. Friend should get on to them, rather than be diverted by irrelevant points raised by the Opposition.

Dr. Gilbert: I undertake to come to the important points raised by my hon. Friend. I do not want to trespass too long on the time of the House.

Mr. MacGregor: The Minister has just accepted that in a time of high inflation, capital gains tax is a heavy burden. At least the last Conservative Government removed capital gains tax on death as an additional burden, and inflation then was nothing like as high as it is now. Why, then, are the Government allowing the continuance of the heavy burden of the capital gains tax here, which is what makes the burden penal on the small and medium-sized businesses?

Dr. Gilbert: It depends entirely on the structure of the capital gains tax. As the hon. Gentleman is well aware, the absence of capital gains tax on death created a distortion of economic markets and a locking-in effect of which the hon. Gentleman has been one of the first to complain.

Mr. Peter Rees: Abolish capital gains tax during life.

Dr. Gilbert: The hon. and learned Gentleman has recovered his voice to intervene from a sedentary position.

Mr. Rees: The hon. Gentleman cannot have it both ways. If he thinks that the absence of capital gains tax at death


created distortion, the remedy is simple: abolish it during life. As the Financial Secretary talked about the free flow of funds from a company to its shareholders, will he explain in simple language, so that the House can grasp it, just how shareholders can extract funds from those companies without incurring tax.

Dr. Gilbert: Of course tax is involved. The hon. and learned Gentleman is insulting the intelligence of the House. If his recipe is to remove capital gains tax entirely, I suggest that he communicates with his right hon. Friends on the Conservative Front Bench, and sees whether that is the banner the Conservative Party wishes to use in the next election, with all the unfairness that such a repeal would produce.
I was unable to be present during the speech of the hon. Member for Cornwall, North (Mr. Pardoe), but I gather that most of his remarks were addressed to the question of a donee tax, an accession tax, rather than a donor tax.

Mr. Pardoe: No.

Dr. Gilbert: The hon. Gentleman also addressed himself to Amendment No. 80, in the name of his right hon. Friend the Member for Devon, North (Mr. Thorpe), which would in effect reduce the death rates to those we are suggesting for lifetime rates. That amendment would cost about £8 million in 1974–75 and £60 million in 1975–76. It will be no surprise to the hon. Gentleman that that is a shortfall in revenue that I cannot recommend to my hon. Friends.

Mr. Pardoe: That is less than a satisfactory reply to what was quite a long speech, which was not at all about accession tax but entirely about the fact that the tax should be at one rate on gifts and deaths. I made the point that as the Government had accepted the principle right at the start of the tax, I expected that they would compromise on the rate, meeting us half way, so that they retained their revenue and did not increase their borrowing requirement.

Mr. Lawson: Will the Financial Secretary—

Mr. Deputy Speaker (Mr. Oscar Murton): Order. We cannot have interventions upon interventions.

Dr. Gilbert: The whole purpose of the lifetime rate was to be of assistance to small businesses. The sort of relief that the Opposition were urging us to provide becomes the subject of mockery when we provide it.

Mr. Lawson: The Financial Secretary said that the Liberal amendment would cost £60 million in 1975–76. Will he now say, since he consistently refused to do so in Committee, what is the yield of tax as the Government propose it for 1975—x2013;76? He must know this since he can tell us the cost of the concession.

Dr. Gilbert: I have checked with my right hon. Friend the Chief Secretary. When we gave the estimate it was about £360 million for 1975–76. In the nature of things the figure must be very much an estimate.

Mr. Cope: rose—

Dr. Gilbert: I cannot give way. I must have given way a dozen times already and I owe it to the House to try to finish and to give the hon. Member for St. Ives (Mr. Nott) an opportunity to speak.

Mr. Cope: On a point of order, Mr. Deputy Speaker. Is it in order for the Financial Secretary to mislead the House and double the rate of CTT compared with the figures which were given earlier?

Mr. Deputy Speaker: That is not a matter for the Chair.

Dr. Gilbert: The hon. Member for Perth and East Perthshire (Mr. Crawford) spoke of the effect of the CTT on Scottish agriculture and forestry. Both these activities are protected by specific reliefs, some of which we discussed yesterday and which will no doubt be debated at greater length when the Report stage resumes on Monday.
My hon. Friend the Member for Leicester, South (Mr. Marshall) made a series of important points concerning his constituency, as did my hon. Friend the Member for Coatbridge and Airdrie (Mr. Dempsey). I hope I have demonstrated to my hon. Friends that we are quite confident that the proposals will have no adverse effect on employment in their constituencies.
One is forced to come back repeatedly to the basic principle advanced by my


hon. Friend the Member for Newcastle-under-Lyme. Many things in this world depend not on merit but on how much a person has to begin with. That is what the tax is about.

Mr. Gwilym Roberts: Will my hon. Friend deal with the question of the concessions made in Committee which was raised by my hon. Friend the Member for Luton, West (Mr. Sedgemore)? We should like more information on the arguments for those concessions.

Dr. Gilbert: I am obliged to my hon. Friend for reminding me, and I wish no discourtesy to my hon. Friend for Luton, West. The rates of this tax fall to be reviewed at any time—

Mr. Peter Rees: What?

Dr. Gilbert: What is so surprising about that? The rates of income tax fall to be varied at any time. The surprise of the hon. and learned Member for Dover and Deal (Mr. Rees) is extraordinary. The rates of capital transfer tax, as of any other tax, fall to be reviewed from time to time. That is almost a banality. If it transpired that they appeared too low, or that certain reliefs were inappropriate, we would review them.
The affection and nostalgia of the hon. Member for Cirencester and Tewkesbury for estate duty are so great because it is a tax that one does not have to pay. We hope that we have successfully blocked all the major loopholes on the transfer from one generation to another of settled property and trusts. That is what the tax does, and that is why I commend it to the House.

Mr. John Nott: With my recognised and well-known talent for understatement I have to say that the Financial Secretary's speech was not a particularly good one. This is probably the last of our major debates on the effect of capital transfer tax. It has gone on for many hours, and the speeches made by Opposition Members have been of a high quality. I regret one or two interventions from Labour supporters who had not sat through the debate and heard many of the questions posed by my hon. Friends, none of which has been answered by the Financial Secretary.
Every speech from the Opposition side emphasised the threat to the continuing identity and even the existence of small firms and the possible bankruptcy of the proprietors. Unless the Government change the whole basis on which capital gains tax interacts with capital transfer tax, the rate of tax will be in excess of the total value of the business. It is the manner in which one tax is being heaped upon another—to use the words of the hon. Member for Llanelli (Mr. Davies)—that makes the proposals so outrageous.
In reply to a question asked by my hon. and learned Friend the Member for Dover and Deal (Mr. Rees) a few minutes ago, the Financial Secretary said that it was up to the Select Committee to consider the interaction of all these capital taxes. In that case, why does this measure have to be put on the statute book at this time? Under the Bill the tax takes effect from 26th March and there was never the slightest need to push the Bill through in the way in which the Government are doing. The matter could have been referred to the select Committee on Wealth Tax and dealt with in a thorough and proper manner.
The Financial Secretary even resorted in his summing-up to saying that the rates would fall to be reviewed at any time. In five weeks' time, we have another Budget and expect to see the rates of tax brought down to reasonable levels.
Since my right hon. and learned Friend the Member for Surrey, East (Sir G. Howe) told one anecdote in opening the debate, I shall do the same in closing it. I was reminded of the old tramp who had a cart which was drawn by a donkey. But on the route the tramp took the cart and the donkey through a tunnel. The donkey kept knocking its ears on the ceiling of the tunnel and eventually the donkey became very demoralised indeed. The tramp took a chisel and began to channel a little route on the top of the tunnel so that the donkey's ears could be accommodated. One of his friends came up to him and said, "Why do you cut those channels in the roof of the tunnel? Why don't you cut a channel in the ground so that he can walk along it?" The tramp said, "Don't be ridiculous. It is not his legs which are too long. It is his ears." I accept that my


little anecdote is not particularly relevant to the Bill, but it is very much more relevant than was the Financial Secretary's reply.
I come to the central question which has run through the debate. It was posed by one speaker after another and was not put better than by the hon. Member for Coatbridge and Airdrie (Mr. Dempsey). He posed the question "How will the owners of these businesses pay the tax? Where is the money to come from?" We have had no answer to that question from a single member of the Government throughout the passage of the Bill.
My hon. Friend the Member for Basingstoke (Mr. Mitchell) gave an example of a firm where it would be necessary to take £50,000 a year out of the business for eight years to pay the tax liability on the lifetime receipt of a business worth £250,000. The Financial Secretary said, "The company would pay dividends and there would be no problem. The proprietors could build up a fund from which to pay the tax."
Let us take my hon. Friend's example. I have in my hand the Government's tax tables which were published with the Budget. To generate £10,000 from investment income, the individual would need to have dividends of £100,000 a year. The amount of money which would be necessary to generate a fund to pay capital transfer tax on a business of that size would involve dividends of up to £1 million a year on a company worth only £250,000. How can the Financial Secretary in answering this debate have made such a fatuous statement?
My hon. Friend the Member for Tiverton (Mr. Maxwell-Hyslop) pointed out that the banks will not lend these sums. He said that if they foresaw eventual liquidation facing a business of that size they would not support the proprietor by lending him the money to pay the tax.
The Financial Secretary said that the proprietors must take steps to mitigate the tax. However, any money that they fail to put into the business will mean less investment in those firms and therefore fewer jobs. Is that what the Labour Government require? Do they require the proprietors of small businesses to withhold money, to put it in a fund to

pay the tax, and thereby to ensure that there is less investment?
The Financial Secretary did not refer to the example given by the hon. Member for Coatbridge and Airdrie. It falls to me, from the Opposition, to answer the question asked by an hon. Friend of the Financial Secretary.
The hon. Member for Coatbridge and Airdrie asked what would be the effect on a £½ million business in Scotland, which he understood would have to generate £28,000 a year to pay the capital transfer tax. He did not include capital gains tax but referred only to the CTT. I think that the hon. Gentleman was interrupted by the Financial Secretary, who implied that the proposed rates on death were no different from those during the time the Conservative Government were in office. Since the Treasury Ministers seem to be ignorant of the comparative situation, I remind them that while the Conservative Government were in power the estate duty on a business worth £½ million, including the small business relief, could have amounted to £170,000. The capital transfer tax on death would amount to £264,000. Therefore, under the original arrangements the tax would have been about £100,000 less.

Dr. Gilbert: The hon. Member for St. Ives (Mr. Nott) will be the first to acknowledge that those figures depend on arbitrary assumptions as to the type of assets involved.

Mr. Nott: Certainly. The 45 per cent. rebate applied to particular classes of asset. However, if the Financial Secretary suggests that the class of assets involved would be unlikely to be sufficient to close the margin of £100,000, he is wrong. Throughout the passage of this measure, repeated statements were made by Treasury Ministers that the taxes on companies were less under their proposals. That is not necessarily true on death.
Our forebears in the House who devised our tax legislation, which had the approval of many Labour Chancellors in its time, produced what were known as death duties. They did not intend to impose a duty on lifetime transfers. The seven-year rule for gifts inter vivos did not exist on the statute book by default. It was there because it was intended to be there. It has enabled


prospering firms to survive through the generations to the great benefit of the nation and of the firms' employees.
The Chief Secretary shakes his head. Does he suggest that small firms do not benefit their employees and the nation? If so, the right hon. Gentleman should say so.

Mr. Joel Barnett: The hon. Member for St. Ives (Mr. Nott) quotes an extreme example. I could quote 100 extreme examples where, under the system of estate duties, small companies would do much worse than under the capital transfer tax. Let the hon. Gentleman quote an average case, not an extreme case.

Mr. Nott: Let me take the type of company which has been referred to many times in these debates, which is the type of thriving British concern probably employing about 200 to 300 workers which might be endeavouring to go public. The right hon. Gentleman must have many in his constituency. Shall we see a company go public worth about £1 million if the capital transfer tax and the capital gains tax that it will have to pay will possibly be in excess of the total net worth of the firm? If the Chief Secretary suggests that a £1 million business will be able to generate enough capital transfer tax and capital gains tax to meet its liability, perhaps he will demonstrate this.

Mr. Joel Barnett: If the company is worth £1 million and floats, at that point there is no question of any capital transfer tax.

Mr. Nott: Surely there is a capital transfer tax on the disposition of the proprietor's interest.

Mr. Barnett: When he is floating off, say, 40 per cent. of the shares, there is no question of liability to capital transfer tax. The 40 per cent. of the shares are transferred at the proper value. I wish that the hon. Gentleman would understand the tax.

Mr. Nott: I understand the tax perfectly well. The CTT may not be payable on the actual disposition in value. That is the case. But it does not alter the fact that a business of this size will meet a liability on lifetime transfers which is totally out of proportion to what the tax was in earlier times. In my view, it is a

travesty to suggest that the new tax will lead to lower rates than those prevailing under the previous administration.
We cannot have anything but a feeling of amazement at the incompetence which has characterised the handling of this measure. Only at 6.30 this evening, the Government were still tabling manuscript amendments to their own Bill. How are we meant to consider this matter in a mature and sensible way if the Government are still tabling manuscript amendments on the evening that we are meant to be considering the clause?
It is clear that this measure was forced upon on ill-equipped Revenue Department with a timetable which the Department was not able to honour. The rates have been shown to be confiscatory as more and more people outside have begun to understand the full impact of the tax. Having found themselves facing a monumental degree of confusion, misunderstanding and criticism as a result of the measure, the Chancellor of the Exchequer has fallen back upon the tactic of abusing the critics among business of this tax as being tax avoiders. Even when we have quoted to the Chief Secretary from reputable newspapers, he has simply smiled and implied that The Guardian, the Financial Times and The Times are all politically motivated against the Labour Government—and that is hopelessly untrue.
I deal with one final matter. The Financial Secretary said that it was totally preposterous for us to make the accusation that the Treasury Bench sought to destroy the small business. That is what he said tonight. I remind him of what he said last night in answer to a speech made by the hon. Member for Luton, West (Mr. Sedgemore), because it shows the depth to which Treasury Ministers will descend to pacify their supporters.
The Financial Secretary said:
It might well be to the greater health of the British economy if those businesses
—small businesses—
which are relatively successful were sold outside the family before a second, third or fourth generation was running them. All the most successful businesses that were quoted to us in Standing Committee time after time were examples of businesses which had started as family businesses and had then gone public or been taken over by bigger enterprises."—[Official Report, 5th March 1975; Vol. 887, c. 1599.]


The hon. Gentleman said clearly last night that he did not mind at all if a business passed out of the hands of a family in the second, third or fourth generation. But tonight he is saying that it is a preposterous accusation to make against Treasury Ministers that they are trying to destroy the small firms.

11.15 p.m.

Dr. Gilbert: That is a totally different proposition. The hon. Gentleman, who is usually so fair about these matters, must recognise that. I was saying last night that it was of great economic benefit to the country that small businesses grew big enough to move outside the family business concept, and that there was no reason to think that entrepreneurial talent was handed down from generation to generation. I said that it was in the interests of the employees of such firms that they were successful enough and big enough to be sold off to larger companies.

Mr. Nott: The Financial Secretary cannot wriggle out of it like that. Anyone reading his words would say that he said something quite different. Furthermore, when discussing the distinction between lifetime and death transfers last night the point was made that a lifetime transfer was more satisfactory and at a lower rate than a death transfer. The margin was referred to, and the Financial Secretary said that it would be widened subsequently as the Government would be introducing capital gains tax on death. Where does it end?
We all know that the undertaking to introduce a gifts tax was in the Labour Party's manifesto, but that assuredly gives the Government no mandate to introduce this tax at these rates. It is more than likely that within a generation it will change the whole structure of the small firm sector and the agricultural sector as well.

Mr. Gwilym Roberts: Hear, hear.

Mr. Nott: The hon. Member for Cannock (Mr. Roberts) says "Hear, hear". I do not believe that there is one Labour supporter who understands that that is what the hon. Gentleman intends or supports. I must warn the Government that they have no mandate for this tax.

Mr. Roberts: Does the hon. Gentleman accept that not only Labour supporters but the great mass of the British public realise that the era of despotism in business is over and that we should move to a much more efficient business system based on genuine managerial skill?

Mr. Nott: There are 6 million people who are employed by small firms, and I do not believe that many of them understand what the Treasury Bench is doing by means of this tax or would agree with it if they knew.
I conclude by saying that the State can go so far but it cannot require of any citizen that he works for a lifetime, and successfully so, only to find that his heirs wind up in the bankruptcy court in trying to meet the unjust claims of the Revenue and to see his employees redundant on the streets. That offends all laws of natural justice. It is in that spirit, and it is because the Government's measures offend against natural justice, that I must ask my right hon. and hon. Friends to divide against this measure by voting against the amendment.

Amendment (d) proposed to the proposed amendment, at end add—
'Provided that only the second table shall apply for a transfer made in respect of shares in a close trading company or assets used in a trade, profession or vocation'.—[Mr. Nott.]

Question put, That the amendment to the proposed amendment be made:—

The House divided: Ayes 215. Noes 228.

Division No. 133.]
AYES
[11.18 p.m.


Adley, Robert
Berry, Hon Anthony
Budgen, Nick


Aitken, Jonathan
Biffen, John
Bulmer, Esmond


Alison, Michael
Biggs-Davison, John
Burden, F. A.


Amery, Rt Hon Julian
Blaker, Peter
Carlisle, Mark


Atkins, Rt Hon H. (Spelthorne)
Bradford, Rev Robert
Carson, John


Awdry, Daniel
Braine, Sir Bernard
Chalker, Mrs Lynda


Bain, Mrs Margaret
Brittan, Leon
Churchill, W. S.


Banks, Robert
Brotherton, Michael
Clark, Alan (Plymouth, Sutton)


Beith, A. J.
Brown, Sir Edward (Bath)
Clarke, Kenneth (Rushcliffe)


Bennett, Dr Reginald (Fareham)
Bryan, Sir Paul
Cockcroft, John


Benyon, W.
Buck, Antony
Cooke, Robert (Bristol W)




Cope, John
Jessel, Toby
Renton, Rt Hon Sir D. (Hunts)


Cormack, Patrick
Johnson Smith, G. (E. Grinstead)
Rhys Williams, Sir Brandon


Costain, A. P.
Jones, Arthur (Daventry)
Ridley, Hon Nicholas


Craig, Rt Hon W. (Belfast E)
Kaberry, Sir Donald
Rifkind, Malcolm


Crawford, Douglas
Kellett-Bowman, Mrs Elaine
Rippon, Rt Hon Geoffrey


Crouch, David
Kimball, Marcus
Roberts, Wyn (Conway)


Crowder, F. P.
Kirk, Peter
Ross, Stephen (Isle of Wight)


Davies, Rt Hon J. (Knutsford)
Lamont, Norman
Rossi, Hugh (Hornsey)


Dean, Paul (N Somerset)
Latham, Michael (Melton)
Rost, Peter (SE Derbyshire)


Dodsworth, Geoffrey
Lawrence, Ivan
Sainsbury, Tim


du Cann, Rt Hon Edward
Lawson, Nigel
St. John-Stevas, Norman


Durant, Tony
Lester, Jim (Beeston)
Scott-Hopkins, James


Dykes, Hugh
Lloyd, Ian
Shaw, Giles (Pudsey)


Eden, Rt Hon Sir John
Loveridge, John
Shaw, Michael (Scarborough)


Edwards, Nicholas (Pembroke)
Luce, Richard
Shelton, William (Streatham)


Elliott, Sir William
McCusker, H.
Shepherd, Colin


Emery, Peter
MacGregor, John
Silvester, Fred


Evans, Gwynfor (Carmarthen)
Macmillan, Rt Hon M. (Farnham)
Sims, Roger


Eyre, Reginald
McNair-Wilson, M. (Newbury)
Skeet, T. H. H.


Farr, John
Marshall, Michael (Arundel)
Smith, Dudley (Warwick)


Fell, Anthony
Marten, Neil
Speed, Keith


Finsberg, Geoffrey
Mates, Michael
Spence, John


Fisher, Sir Nigel
Mather, Carol
Spicer, Jim (W Dorset)


Fletcher-Cooke, Charles
Maude, Angus
Spicer, Michael (S Worcester)


Fowler, Norman (Sutton C'f'd)
Maudling, Rt Hon Reginald
Sproat, Iain


Fox, Marcus
Maxwell-Hyslop, Robin
Stainton, Keith


Fraser, Rt Hon H. (Stafford &amp; St)
Meyer, Sir Anthony
Stanbrook, Ivor


Freud, Clement
Miller, Hal (Bromsgrove)
Stanley, John


Fry, Peter
Miscampbell, Norman
Steel, David (Roxburgh)


Gardiner, George (Reigate)
Mitchell, David (Basingstoke)
Steen, Anthony (Wavertree)


Gardner, Edward (S Fylde)
Molyneaux, James
Stewart, Donald (Western Isles)


Gilmour, Sir John (East Fife)
Montgomery, Fergus
Stewart, Ian (Hitchin)


Glyn, Dr Alan
Moore, John (Croydon C)
Stokes, John


Goodhart, Philip
More, Jasper (Ludlow)
Stradling Thomas, J.


Goodhew, Victor
Morgan-Giles, Rear-Admiral
Taylor, R. (Croydon NW)


Goodlad, Alastair
Morris, Michael (Northampton S)
Tebbit, Norman


Gow, Ian (Eastbourne)
Morrison, Charles (Devizes)
Temple-Morris, Peter


Grant, Anthony (Harrow C)
Morrison, Hon Peter (Chester)
Thatcher, Rt Hon Margaret


Griffiths, Eldon
Mudd, David
Thomas, Dafydd (Merioneth)


Grimond, Rt Hon J.
Neave, Airey
Thompson, George


Hall, Sir John
Nelson, Anthony
Thorpe, Rt Hon Jeremy (N Devon)


Hall-Davis, A. G. F.
Neubert, Michael
Townsend, Cyril D.


Hamilton, Michael (Salisbury)
Newton, Tony
Trotter, Neville


Hampson, Dr Keith
Normanton, Tom
Tugendhat, Christopher


Harrison, Col Sir Harwood (Eye)
Nott, John
van Straubenzee, W. R.


Hastings, Stephen
Onslow, Cranley
Vaughan, Dr. Gerard


Hawkins, Paul
Osborn, John
Viggers, Peter


Heseltine, Michael
Page, John (Harrow West)
Wakeham, John


Hicks, Robert
Page, Rt Hon R. Graham (Crosby)
Walker-Smith, Rt Hon Sir Derek


Higgins, Terence L.
Paisley, Rev. Ian
Watt, Hamish


Holland, Philip
Pardoe, John
Weatherill, Bernard


Hooson, Emlyn
Parkinson, Cecil
Wells, John


Hordern, Peter
Pattie, Geoffrey
Welsh, Andrew


Howe, Rt Hn Sir Geoffrey
Penhaligon, David
Wiggin, Jerry


Howell, David (Guildford)
Percival, Ian
Wilson, Gordon (Dundee E)


Howell, Ralph (North Norfolk)
Peyton, Rt Hon John
Winterton, Nicholas


Howells, Geraint (Cardigan)
Powell, Rt Hon J. Enoch
Wood, Rt Hon Richard


Hunt, John
Prior, Rt Hon James
Young, Sir G. (Ealing, Acton)


Hurd, Douglas
Raison, Timothy



Irving, Charles (Cheltenham)
Rees, Peter (Dover &amp; Deal)
TELLERS FOR THE AYES:


James, David
Rees-Davies, W. R.
Mr. Adam Butler and


Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
Reid, George
Mr. Russell Fairgrieve.




NOES


Abse, Leo
Boyden, James (Bish Auck)
Crosland, Rt Hon Anthony


Allaun, Frank
Bradley, Tom
Cryer, Bob


Anderson, Donald
Brown, Robert C. (Newcastle W)
Cunningham, G. (Islington S)


Archer, Peter
Brown, Ronald (Hackney S)
Dalyell, Tam


Armstrong, Ernest
Butler, Mrs Joyce (Wood Green)
Davidson, Arthur


Ashton, Joe
Callaghan, Jim (Middleton &amp; P)
Davies, Bryan (Enfield N)


Atkins, Ronald (Preston N)
Carmichael, Neil
Davies, Denzil (Llanelli)


Bagier, Gordon A. T.
Carter, Ray
Davis, Clinton (Hackney C)


Barnett, Guy (Greenwich)
Carter-Jones, Lewis
Deakins, Eric


Barnett, Rt Hon Joel (Heywood)
Castle, Rt Hon Barbara
Dean, Joseph (Leeds West)


Bates, Alf
Clemitson, Ivor
de Freitas, Rt Hon Sir Geoffrey


Bean, R. E.
Cocks, Michael (Bristol S)
Dell, Rt Hon Edmund


Benn, Rt Hon Anthony Wedgwood
Cohen, Stanley
Dormand, J. D.


Bennett, Andrew (Stockport N)
Coleman, Donald
Douglas-Mann, Bruce


Bidwell, Sydney
Colquhoun, Mrs Maureen
Duffy, A. E. P.


Blenkinsop, Arthur
Cook, Robin F. (Edin C)
Dunn, James A.


Boardman, H.
Corbett, Robin
Dunnett, Jack


Booth, Albert
Cox, Thomas (Tooting)
Dunwoody, Mrs Gwyneth


Bottomley, Rt Hon Arthur
Cronin, John
Edelman, Maurice







Edge, Geoff
Lee, John
Rodgers, William (Stockton)


Edwards, Robert (Wolv SE)
Lever, Rt Hon Harold
Rooker, J. W.


Ellis, John (Brigg &amp; Scun)
Lewis, Ron (Carlisle)
Roper, John


Ellis, Tom (Wrexham)
Lipton, Marcus
Rose, Paul B.


English, Michael
Loyden, Eddie
Ryman, John


Ennals, David
Luard, Evan
Sandelson, Neville


Evans, Ioan (Aberdare)
Lyon, Alexander (York)
Sedgemore, Brian


Evans, John (Newton)
Lyons, Edward (Bradford W)
Selby, Harry


Ewing, Harry (Stirling)
McCartney, Hugh
Shaw, Arnold (Ilford South)


Fernyhough, Rt Hon E.
McGuire, Michael (Ince)
Sheldon, Robert (Ashton-u-Lyne)


Fitt, Gerard (Belfast W)
Mackintosh, John P.
Shore, Rt Hon Peter


Flannery, Martin
Maclennan, Robert
Short, Mrs Renée (Wolv NE)


Fletcher, Ted (Darlington)
McNamara, Kevin
Silkin, Rt Hon John (Deptford)


Foot, Rt Hon Michael
Madden, Max
Silkin, Rt Hon S. C. (Dulwich)


Ford, Ben
Magee, Bryan
Silverman, Julius


Fowler, Gerald (The Wrekin)
Mahon, Simon
Skinner, Dennis


Fraser, John (Lambeth, N'w'd)
Marquand, David
Smith, John (N Lanarkshire)


Freeson, Reginald
Marshall, Dr Edmund (Goole)
Snape, Peter


Garrett, John (Norwich S)
Marshall, Jim (Leicester S)
Spearing, Nigel


Garrett, W. E. (Wallsend)
Meacher, Michael
Spriggs, Leslie


Gilbert, Dr John
Mellish, Rt Hon Robert
Stallard, A. W.


Ginsburg, David
Mikardo, Ian
Stott, Roger


Golding, John
Miller, Dr M. S. (E Kilbride)
Strauss, Rt Hon G. R.


Gould, Bryan
Millar, Mrs Millie (Ilford N)
Summersklll, Hon Dr Shirley


Graham, Ted
Mitchell, R. C. (Soton, Itchen)
Taylor, Mrs Ann (Bolton W)


Grant, John (Islington C)
Molloy, William
Thomas, Jeffrey (Abertillery)


Grocott, Bruce
Moonman, Eric
Thomas, Mike (Newcastle E)


Hardy, Peter
Morris, Alfred (Wythenshawe)
Thomas, Ron (Bristol NW)


Harper, Joseph
Morris, Charles R. (Openshaw)
Thorne, Stan (Preston South)


Harrison, Walter (Wakefield)
Mulley, Rt Hon Frederick
Tierney, Sydney


Hatton, Frank
Murray, Rt Hon Ronald King
Tomlinson, John


Hayman, Mrs Helene
Newens, Stanley
Torney, Tom


Healey, Rt Hon Denis
Noble, Mike
Varley, Rt Hon Eric G.


Heffer, Eric S.
Oakes, Gordon
Wainwright, Edwin (Dearne V)


Hooley, Frank
Ogden, Eric
Walker, Harold (Doncaster)


Horam, John
O'Halloran, Michael
Walker, Terry (Kingswood)


Howell, Denis (B'ham, Sm H)
O'Malley, Rt Hon Brian
Ward, Michael


Hoyle, Doug (Nelson)
Orbach, Maurice
Watkins, David


Huckfield, Les
Ovenden, John
Watkinson, John


Hughes, Rt Hon C. (Anglesey)
Owen, Dr David
Weitzman, David


Hughes, Mark (Durham)
Padley, Walter
Wellbeloved, James


Hughes, Robert (Aberdeen N)
Palmer, Arthur
Whitehead, Phillip


Hughes, Roy (Newport)
Park, George
Whitlock, William


Irving, Rt Hon S. (Dartlord)
Parker, John
Willey, Rt Hon Frederick


Jackson, Colin (Brighouse)
Parry, Robert
Williams, Alan (Swansea W)


Jackson, Miss Margaret (Lincoln)
Pavitt, Laurie
Williams, Alan Lee (Hornch'ch)


Janner, Greville
Peart, Rt Hon Fred
Williams, Rt Hon Shirley (Hertford)


Jay, Rt Hon Douglas
Pendry, Tom
Williams, W. T. (Warrington)


Jeger, Mrs Lena
Perry, Ernest
Wilson, Rt Hon H. (Huyton)


Jenkins, Hugh (Putney)
Prentice, Rt Hon Reg
Wilson, William (Coventry SE)


Johnson, Walter (Derby S)
Prescott, John
Wise, Mrs Audrey


Jones, Dan (Burnley)
Price, C. (Lewisham W)
Woodall, Alec


Kaufman, Gerald
Radice, Giles
Wrigglesworth, Ian


Kerr, Russell
Richardson, Miss Jo
Young, David (Bolton E)


Kilroy-Silk, Robert
Roberts, Albert (Normanton)



Lamborn, Harry
Roberts, Gwilym (Cannock)
TELLERS FOR THE NOES:


Lamond, James
Roderick, Caerwyn
Miss Betty Boothroyd and


Latham, Arthur (Paddington)
Rodgers, George (Chorley)
Mr. David Stoddart.


Leadbitter, Ted

Question accordingly negatived.

Main Question put and agreed to.

Amendments made: No. 78, in page 27, line 7, leave out 'the Table' and insert 'each of the Tables'.

No. 79, in page 27, line 12, at beginning insert 'FIRST'.—[Dr. Gilbert.]

Amendment proposed: No. 80, in page 27, leave out lines 13 to 30 and add—


'Slice of Chargeable transfers—£000
Rate on slice %


0–15
—


15–20
5


20–25
7½


25–30
10





'Slice of Chargeable transfers—£000
Rate on slice %


30–40
12½


40–50
15


50–60
17½


60–80
20


80–100
22½


100–120
27½


120–150
35


150–200
42½


200–250
50


250–300
55


300–500
60


500–1,000
65


1,000–2,000
70


2,000+
75'.


—[Mr. Pardoe.]

Question put, That the amendment be made:—

The House divided: Ayes 213, Noes 229.

Division No. 134.]
AYES
[11.34 p.m.


Adley, Robert
Grimond, Rt Hon J.
Paisley, Rev. Ian


Aitken, Jonathan
Hall, Sir John
Pardoe, John


Alison, Michael
Hall-Davis, A. G. F.
Parkinson, Cecil


Amery, Rt Hon Julian
Hamilton, Michael (Salisbury)
Pattie, Geoffrey


Atkins, Rt Hon H. (Spelthorne)
Hampson, Dr Keith
Penhaligon, David


Awdry, Daniel
Harrison, Col Sir Harwood (Eye)
Percival, Ian


Bain, Mrs Margaret
Hastings, Stephen
Peyton, Rt Hon John


Banks, Robert
Hawkins, Paul
Powell, Rt Hon J. Enoch


Bennett, Dr Reginald (Fareham)
Heseltine, Michael
Prior, Rt Hon James


Benyon, W.
Hicks, Robert
Raison, Timothy


Berry, Hon Anthony
Higgins, Terence L.
Rees, Peter (Dover &amp; Deal)


Biffen, John
Holland, Philip
Reid, George


Biggs-Davison, John
Hooson, Emlyn
Renton, Rt Hon Sir D. (Hunts)


Blaker, Peter
Hordern, Peter
Rhys Williams, Sir Brandon


Bradford, Rev Robert
Howe, Rt Hn Sir Geoffrey
Ridley, Hon Nicholas


Braine, Sir Bernard
Howell, David (Guildford)
Rifkind, Malcolm


Brittan, Leon
Howell, Ralph (North Norfolk)
Rippon, Rt Hon Geoffrey


Brotherton, Michael
Howells, Geraint (Cardigan)
Roberts, Wyn (Conway)


Brown, Sir Edward (Bath)
Hunt, John
Ross, Stephen (Isle of Wight)


Bryan, Sir Paul
Hurd, Douglas
Rossi, Hugh (Hornsey)


Buck, Antony
Irving, Charles (Cheltenham)
Rost, Peter (SE Derbyshire)


Budgen, Nick
James, David
Sainsbury, Tim


Bulmer, Esmond
Jenkin, Rt Hon P. (Wanst'd &amp; W'df'd)
St. John-Stevas, Norman


Burden, F. A.
Jessel, Toby
Scott-Hopkins, James


Butler, Adam (Bosworth)
Johnson Smith, G. (E. Grinstead)
Shaw, Giles (Pudsey)


Carlisle, Mark
Jones, Arthur (Daventry)
Shaw, Michael (Scarborough)


Carson, John
Kellett-Bowman, Mrs Elaine
Shelton, William (Streatham)


Chalker, Mrs Lynda
Kimball, Marcus
Shepherd, Colin


Churchill, W. S.
Kirk, Peter
Silvester, Fred


Clark, Alan (Plymouth, Sutton)
Lamont, Norman
Sims, Roger


Clarke, Kenneth (Rushcliffe)
Latham, Michael (Melton)
Skeet, T. H. H.


Cockcroft, John
Lawrence, Ivan
Smith, Dudley (Warwick)


Cooke, Robert (Bristol W)
Lawson, Nigel
Speed, Keith


Cope, John
Le Marchant, Spencer
Spicer, Jim (W Dorset)


Cormack, Patrick
Lester, Jim (Beeston)
Spicer, Michael (S Worcester)


Costain, A. P.
Lloyd, Ian
Sproat, Ia'n


Craig, Rt Hon W. (Belfast E)
Loveridge, John
Stainton, Keith


Crawford, Douglas
Luce, Richard
Stanbrook, Ivor


Crouch, David
McCusker, H.
Stanley, John


Crowder, F. P.
MacGregor, John
Steen, Anthony (Wavertree)


Davies, Rt Hon J. (Knutsford)
Macmillan, Rt Hon M. (Farnham)
Stewart, Donald (Western Isles)


Dean, Paul (N Somerset)
McNair-Wilson, M. (Newbury)
Stewart, Ian (Hitchin)


Dodsworth, Geoffrey
Marshall, Michael (Arundel)
Stokes, John


du Cann, Rt Hon Edward
Marten, Neil
Stradling Thomas, J.


Durant, Tony
Mates, Michael
Taylor, R. (Croydon NW)


Dykes, Hugh
Mather, Carol
Tebbit, Norman


Eden, Rt Hon Sir John
Maude, Angus
Temple-Morris, Peter


Edwards, Nicholas (Pembroke)
Maudling, Rt Hon Reginald
Thatcher, Rt Hon Margaret


Elliott, Sir William
Maxwell-Hyslop, Robin
Thomas, Dafydd (Merioneth)


Emery, Peter
Meyer, Sir Anthony
Thompson, George


Evans, Gwynfor (Carmarthen)
Miller, Hal (Bromsgrove)
Thorpe, Rt Hon Jeremy (N Devon)


Eyre, Reginald
Miscampbell, Norman
Townsend, Cyril D.


Fairgrieve, Russell
Mitchell, David (Basingstoke)
Trotter, Neville


Farr, John
Molyneaux, James
Tugendhat, Christopher


Fell, Anthony
Montgomery, Fergus
van Straubenzee, W. R.


Finsberg, Geoffrey
Moore, John (Croydon C)
Vaughan, Dr. Gerard


Fisher, Sir Nigel
More, Jasper (Ludlow)
Viggers, Peter


Fletcher-Cooke, Charles
Morgan-Giles, Rear-Admiral
Wakeham, John


Fowler, Norman (Sutton C'f'd)
Morris, Michael (Northampton S)
Walker-Smith, Rt Hon Sir Derek


Fox, Marcus
Morrison, Charles (Devizes)
Watt, Hamish


Fraser, Rt Hon H. (Stafford &amp; St)
Morrison, Hon Peter (Chester)
Weatherill, Bernard


Freud, Clement
Mudd, David
Wells, John


Fry, Peter
Neave, Airey
Welsh, Andrew


Gardiner, George (Reigate)
Nelson, Anthony
Wiggin, Jerry


Gardner, Edward (S Fylde)
Neubert, Michael
Wilson, Gordon (Dundee E)


Gilmour, Sir John (East Fife)
Newton, Tony
Winterton, Nicholas


Glyn, Dr Alan
Normanton, Tom
Wood, Rt Hon Richard


Goodhart, Philip
Nott, John
Young, Sir G. (Ealing, Acton)


Goodhew, Victor
Onslow, Cranley



Goodlad, Alastair
Osborn, John
TELLERS FOR THE AYES:


Gow, Ian (Eastbourne)
Page, John (Harrow West)
Mr. David Steel aad


Grant, Anthony (Harrow C)
Page, Rt Hon R. Graham (Crosby)
Mr. A. J. Beith.


Griffiths, Eldon






NOES


Abse, Leo
Ginsburg, David
Owen, Dr David


Allaun, Frank
Golding, John
Padley, Walter


Anderson, Donald
Gould, Bryan
Palmer, Arthur


Archer, Peter
Graham, Ted
Park, George


Armstrong, Ernest
Grant, John (Islington C)
Parker, John


Ashley, Jack
Grocott, Bruce
Parry, Robert


Ashton, Joe
Hardy, Peter
Pavitt, Laurie


Atkins, Ronald (Preston N)
Harrison, Walter (Wakefield)
Peart, Rt Hon Fred


Bagier, Gordon A. T.
Hart, Rt Hon Judith
Pendry, Tom


Barnett, Guy (Greenwich)
Hatton, Frank
Perry, Ernest


Barnett, Rt Hon Joel (Heywood)
Hayman, Mrs Helene
Prentice, Rt Hon Reg


Bates, Alf
Healey, Rt Hon Denis
Prescott, John


Bean, R. E.
Heffer, Eric S.
Price, C. (Lewisham W)


Benn, Rt Hon Anthony Wedgwood
Hooley, Frank
Radice, Giles


Bennett, Andrew (Stockport N)
Horam, John
Richardson, Miss Jo


Bidwell, Sydney
Howell, Denis (B'ham, Sm H)
Roberts, Gwilym (Cannock)


Blenkinsop, Arthur
Hoyle, Doug (Nelson)
Roderick, Caerwyn


Boardman, H.
Huckfield, Les
Rodgers, George (Chorley)


Booth, Albert
Hughes, Rt Hon C. (Anglesey)
Rodgers, William (Stockton)


Bottomley, Rt Hon Arthur
Hughes, Mark (Durham)
Rooker, J. W.


Boyden, James (Bish Auck)
Hughes, Robert (Aberdeen N)
Roper, John


Bradley, Tom
Hughes, Roy (Newport)
Rose, Paul B.


Brown, Robert C. (Newcastle W)
Irving, Rt Hon S. (Dartford)
Ryman, John


Brown, Ronald (Hackney S)
Jackson, Colin (Brighouse)
Sandelson, Neville


Butler, Mrs Joyce (Wood Green)
Jackson, Miss Margaret (Lincoln)
Sedgemore, Brian


Callaghan, Jim (Middleton &amp; P)
Janner, Greville
Selby, Harry


Carmichael, Neil
Jay, Rt Hon Douglas
Shaw, Arnold (Ilford South)


Carter, Ray
Jeger, Mrs Lena
Sheldon, Robert (Ashton-u-Lyne)


Carter-Jones, Lewis
Jenkins, Hugh (Putney)
Shore, Rt Hon Peter


Castle, Rt Hon Barbara
Johnson, Walter (Derby S)
Short, Mrs Renée (Wolv NE)


Clemitson, Ivor
Jones, Dan (Burnley)
Silkin, Rt Hon John (Deptford)


Cocks, Michael (Bristol S)
Kaufman, Gerald
Silkin, Rt Hon S. C. (Dulwich)


Cohen, Stanley
Kerr, Russell
Silverman, Julius


Colquhoun, Mrs Maureen
Kilroy-Silk, Robert
Skinner, Dennis


Conlan, Bernard
Lamborn, Harry
Smith, John (N Lanarkshire)


Cook, Robin F. (Edin C)
Lamond, James
Snape, Peter


Corbett, Robin
Latham, Arthur (Paddington)
Spearing, Nigel


Cox, Thomas (Tooting)
Leadbitter, Ted
Spriggs, Leslie


Cronin, John
Lee, John
Stallard, A. W.


Crosland, Rt Hon Anthony
Lever, Rt Hon Harold
Stoddart, David


Cryer, Bob
Lewis, Ron (Carlisle)
Stott, Roger


Cunningham, G. (Islington S)
Lipton, Marcus
Strauss, Rt Hon G. R.


Dalyell, Tam
Loyden, Eddie
Summerskill, Hon Dr Shirley


Davidson, Arthur
Luard, Evan
Taylor, Mrs Ann (Bolton W)


Davies, Bryan (Enfield N)
Lyon, Alexander (York)
Thomas, Jeffrey (Abertillery)


Davies, Denzil (Llanelli)
Lyons, Edward (Bradford W)
Thomas, Mike (Newcastle E)


Davis, Clinton (Hackney C)
McCartney, Hugh
Thomas, Ron (Bristol NW)


Deakins, Eric
McGuire, Michael (Ince)
Thorne, Stan (Preston South)


Dean, Joseph (Leeds West)
Mackintosh, John P.
Tierney, Sydney


de Freitas, Rt Hon Sir Geoffrey
Maclennan, Robert
Tomlinson, John


Dell, Rt Hon Edmund
McNamara, Kevin
Torney, Tom


Dormand, J. D.
Madden, Max
Varley, Rt Hon Eric G.


Douglas-Mann, Bruce
Magee, Bryan
Wainwright, Edwin (Dearne V)


Duffy, A. E. P.
Mahon, Simon
Walker, Harold (Doncaster)


Dunn, James A.
Marquand, David
Walker, Terry (Kingswood)


Dunnett, Jack
Marshall, Dr Edmund (Goole)
Ward, Michael


Dunwoody, Mrs Gwyneth
Marshall, Jim (Leicester S)
Watkins, David


Edelman, Maurice
Meacher, Michael
Watkinson, John


Edge, Geoff
Mellish, Rt Hon Robert
Weitzman, David


Edwards, Robert (Wolv SE)
Mikardo, Ian
Wellbeloved, James


Ellis, Tom (Wrexham)
Miller, Dr M. S. (E Kilbride)
White, Frank R. (Bury)


English, Michael
Miller, Mrs Millie (Ilford N)
Whitehead, Phillip


Ennals, David
Mitchell, R. C. (Soton, Itchen)
Whitlock, William


Evans, Ioan (Aberdare)
Molloy, William
Williams, Alan (Swansea W)


Evans, John (Newton)
Moonman, Eric
Williams, Alan Lee (Hornch'ch)


Ewing, Harry (Stirling)
Morris, Alfred (Wythenshawe)
Williams, Rt Hon Shirley (Hertford)


Fernyhough, Rt Hon E.
Morris, Charles R. (Openshaw)
Williams, W. T. (Warrington)


Fitt, Gerard (Belfast W)
Mulley, Rt Hon Frederick
Wilson, Rt Hon H. (Huyton)


Flannery, Martin
Murray, Rt Hon Ronald King
Wilson, William (Coventry SE)


Fletcher, Ted (Darlington)
Newens, Stanley
Wise, Mrs Audrey


Foot, Rt Hon Michael
Noble, Mike
Woodall, Alec


Ford, Ben
Oakes, Gordon
Wrigglesworth, Ian


Fowler, Gerald (The Wrekin)
Ogden, Eric
Young, David (Bolton E)


Fraser, John (Lambeth, N'w'd)
O'Halloran, Michael



Freeson, Reginald
O'Malley, Rt Hon Brian
TELLERS FOR THE NOES:


Garrett, John (Norwich S)
Orbach, Maurice
Mr. Joseph Harper and


Garrett, W. E. (Wallsend)
Ovenden, John
Mr. John Ellis.


Gilbert, Dr John

Question accordingly negatived.

Amendment made: No. 81, in page 27, line 30, at end insert—


'SECOND TABLE


Portion of value
Rate of tax


Lower limit
Upper limit
Per cent.


£
£



0
15,000
Nil


15,000
20,000
5


20,000
25,000
7½


25,000
30,000
10


30,000
40,000
12½


40,000
50,000
15


50,000
60,000
17½


60,000
80,000
20


80,000
100,000
22½


100,000
120,000
27½


120,000
150,000
35


150,000
200,000
42½


200,000
250,000
50


250,000
300,000
55


300,000
500,000
60


500,000
1,000,000
65


1,000,000
2,000,000
70


2,000,000
—
75'


—[Dr. Gilbert.]

Clause 39

FREE LOANS, ETC.

Dr. Gilbert: I beg to move Amendment No. 92, in page 30, line 35, at end insert
'but no period beginning before 6th April 1976 shall be a chargeable period'.

Mr. Deputy Speaker (Sir Myer Galpern): With this amendment I think that it would be convenient to discuss amendment (a) to this amendment, in line 2, leave out '1976' and insert '1980'.
We may also discuss the following amendments:
No. 415, in page 30, line 20, at end add
', subject to subsections (3) to (5) below,';
No. 416, in page 30, line 31, at end add
'which shall be deemed to include the value transferred'.
No. 91, in page 30, line 31, at end insert—
'Provided that this subsection shall not apply when a person allows another person the use of a dwelling house free, or for a lesser consideration than might reasonably have been expected'.

No. 438, in page 30, line 31, at end insert—
'( ) For the avoidance of doubt it is hereby declared that a dividend waiver is not a transfer of value'.
No. 419, in page 30, line 35, at end add—
'(3) Subsection (1) of this section shall not apply in relation to any loan to or to the allowance of the use of money or other property to, any unincorporated business or any company carrying on a business, if—

(a) the person who apart from this subsection would be treated as the transferor is—

(i) engaged in that business either alone or in partnership, or
(ii) (in relation to a company) a director or shareholder or full-time employee of the company in question, or
(iii) any person who is connected to any such person as is specified in subparagraphs (i) and (ii) of this subsection within the meaning of subsection (4) of section 48 of this Act; and

(b) the business in question is one falling within the definition of sub-paragraph (6) of paragraph 14 of Schedule 4 to this Act.

(4) Subsection (1) of this section shall not apply in relation to the use of any money or other property if the transferee is a partner, employee or former employee of the transferor; provided that, in the case of a former employee, his employment was terminated by reason of old age, infirmity, or ill health.
(5) Subsection (1) of this section shall not apply in relation to any such matter as is therein mentioned if the transferee, borrower or permitted user is a person or body of persons, whether incorporated or not, which is carrying on an activity in the nature of a trade otherwise than for profit, or is a members' club or registered friendly society, and the loan or permitted use is in connection with that activity or with the activities of such members' club or registered friendly society; nor shall subsection (1) of this section apply if the transferee, borrower or permitted user is a church, chapel, synagogue or mosque'.

Dr. Gilbert: The Government undertook in Committee to put down an amendment on Report so that the charges under this clause—then Clause 36—would not start to run until 6th April 1976. This is an area of considerable complexity. My right hon. Friend and I have undertaken to consider quite a few matters relating to the clause. That is why we propose to postpone its coming into effect. By the time it has come into effect I hope that we shall be able to meet some of the points made in Committee. I shall be happy to answer any questions.

11.45 p.m.

Mr. Lawson: This will have to be a very brief debate, although it is on a very important clause. In many ways it is the most iniquitous clause in the Bill, as it is an attempt to levy tax on a purely notional transfer.
We had an undertaking in Standing Committee, as the Financial Secretary has stated. We believe that undertaking should go further at present and that there should be no charge at all until 1980, so that at least there could be a General Election before there is any question of this tax being imposed.
Meanwhile, we want to hear from the Financial Secretary whether he will reiterate the undertakings he gave in Standing Committee that he would table particular amendments on Report—which he has been unable, it seems, to do.
I shall refer to various columns of the Official Report of our proceedings in Standing Committee on 12th February, although it was in the small hours of 13th February when we debated this matter. As reported at column 1526, the Financial Secretary conceded that loans to partnerships and loans by one partner to another partner in a partnership would be exempt.
I hope that the Financial Secretary will pay attention to what I am saying and not to what the Government Chief Whip is saying.
At column 1528 the hon. Gentleman conceded that there would be exemption of "loans to companies" and that there would be an amendment on Report. At column 1544 he changed this to "loans to businesses".
At column 1575 he said that it would be loans to partnerships and close companies. He promised again that he would table an amendment on Report. He has not done so. We want to make sure that he is going to do that and not use this delay as any excuse for getting away from the commitment he made in Standing Committee.
Again, the Financial Secretary said in Standing Committee—and this is very important—that for the purposes of this—I should be grateful if the Financial Secretary would pay attention to me and not to the hon. Member for Durham (Mr. Hughes), interesting though he is. The

Financial Secretary conceded that for the purposes of this clause relating to a notional income—because what we are talking about is a notional income—the gross difference between the nil interest which is charged normally in these cases and the notional interest which might be expected to be charged would be deemed to be part of the net income of the putative transferor. We want that undertaking restarted tonight. This is very important indeed. In particular, the Financial Secretary also said in Standing Committee that it would be treated as normal expenditure and as a normal income of the transferor—in other words, that there would be an out-of-income exemption in Schedule 6 for such transfers.
It seems to us very strange that there is any longer any reason for the clause to be in the Bill at all, because the out-of-income exemption, coupled with the other exemptions about which the Financial Secretary gave solemn undertakings that he would table amendments on Report, means that there are virtually no cases in which this particular notional transfer would fall to attract tax. Indeed, it is very right that that is so.
In conclusion I shall say only that a large number of close companies and private companies are financed by interest-free loans from the proprietors or the participators. The Chief Secretary knows that very well. Their premises may be rent-free premises provided by the participators and proprietors of the business. Indeed, there is also the case in the private sphere of rent-free accommodation provided to former employees.
What the Chancellor of the Exchequer has been able to say on this clause appeared in Hansard for yesterday. He said:
The answer that I gave to the hon. Member for Blaby (Mr. Lawson) was on advice that I received.
This was the Chancellor's excuse for having got it wrong, as so often he gets things wrong, on Second Reading. He continued:
I have read with interest the points made by the hon. Gentleman in Committee upstairs. It is true that the precise juridical meaning of the word 'use' in the clause is open to argument. For that reason, as I think the hon. and learned Member for Dover and Deal (Mr. Rees) knows, we have put down an amendment,


which will be considered in the next few days, which will prevent the clause applying until April 1976. By that time we hope to have a completely satisfactory juridical formula."—[Official Report, 5th March 1975; Vol. 887, c. 1494]
It is most unsatisfactory that at this stage, on a clause which is of the utmost importance for every private business, the Government still cannot find a juridical formula, as it is called, not merely for the case cited by me and then cited by the Chancellor but for all these cases of loans to close companies, loans to partnerships, loans to non-profit-making organisations, clubs, churches and the rest in whose case also interest-free loans fall to be caught.
I want a solemn undertaking from the Financial Secretary that in the next Finance Bill the undertakings which he gave will be implemented in the form of amendments, including, most important of all, an amendment making clear that the notional income which is alleged to be caught will be the net income of the transferor and will therefore be exempt under the out-of-income exemption under Schedule 6.

Mr. Ridley: We have reached a stage of legislative farce which has seldom been paralleled in the history of any Parliament. The clause sets out to apply capital taxation to what are, in effect, income payments. I have suggested that the clause may well be out of order, and, though I do not wish to pursue that now, I find it a curious anomaly that a tax which is called a capital transfer tax should be deemed to apply to notional income payments, whether or not they have been received.
In addition, the clause has been applicable since 26th March 1974, but it will not apply until 6th April 1976. Thus, we have here a clause which is out of order, which applies capital taxation to income payments, which has been on the statute book for two years, but which is not to be applicable until the end of that two-year period, by which time it will have been totally remodelled and brought forward again.
I assume that this is the sort of legislative gobbledygook which endears itself to the Labour Party—that citizens are told for two years that they are subject to this tax, though they will not be told

the details of it and the payments do not have to be made till 1976, so that transactions which might be entered into at any time over those two years will have been taxable under the clause although they are income transactions, and the Treasury in its wisdom will in due course make up its mind what it thinks the clause is supposed to mean and who is supposed to pay tax under it. This is the glorious Socialist heaven which hon. Members have been fighting and working for, and I congratulate them.
For so long as I am able to recall the events on this Bill, I shall always remember the words of the Chief Secretary ringing out when we were in Committee on the Floor of the House—"We believe that we have here a good tax, and we are sticking to it". Does he still think that?

Mr. Tim Sainsbury: My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) said that this is an absurd clause. I wish to add to what my hon. Friend the Member for Blaby (Mr. Lawson) said. He found no reason for the clause being in the Bill at all. I can find one reason and one only of any merit, and that is to provide a convenient place for the making of our Amendment No. 438.
This is a matter of interest to many small and medium-size companies, especially those in which the executive directors and managers hold an equity stake. I hope that the Financial Secretary will at least agree with me that those companies play a valuable rôle in our economy, and are more than the average dependent upon retained earnings for their investment and therefore the continuity of the employment they provide.
The shareholders in those companies will include a number of institutions, such as Finance for Industry, as well as retired managers and employees and widows of retired managers. Therefore, it is necessary for the companies to pay dividends. Yet it has been the practice for many years for the working directors and managers who have an equity shareholding to waive the dividends to which they would be entitled to help the retained earnings of those companies, to help their investment, to help them provide more employment and more growth in the economy.
It may seem absurd that we have this extraordinary capital taxation on an income transaction. It seems to me even more absurd that we should have a capital tax on an income transfer which has not taken place. Therefore, I particularly commend Amendment No. 438. Under existing legislation, the Inland Revenue has powers to prevent the abuse of dividend waivers. The vast majority of companies to which this would apply are close companies. Therefore, if there is any thought that the provision is being abused there is already legislation which would allow for that to be stopped.
If we are to allow retentions, which are essential to investment, dividend waivers must be clearly shown not to be a transfer, and therefore in no way caught by this extraordinary and unnecessary clause.

Mr. David Howell: The clause is peculiar, in that it appears to have been drafted without the dimmest understanding of the way in which close companies or partnerships work. That is not surprising, because Labour Members want to wipe most small businesses off the face of the earth by the tax. In its original form, the clause would have gone some way towards having that effect on close companies and partnerships.
The Government are planning to postpone the whole thing until April of next year, which we believe would have been a good idea for the entire tax. We want to make sure that they are not just shuffling it forward, and going back on the undertakings in Standing Committee that in any new clause full allowance would be made for two amendments which were pressed.
The first was that the gross interest would count against net income. We want to make sure that that is kept on board and not lost in the year during which the search for the better juridical form takes place—the absurd search for the Snark of a clause which appears to be very elusive. When the clause was drafted and approved by the Chancellor and Treasury Ministers they did not have a clue about the effect it would have on small business, and the damage it would do. Now that they have heard our arguments, we want to be sure that some understanding has penetrated their minds and that they are sure that their undertakings will be kept.

If the clause had been left as it was, that would have been the end of close company finances of a normal kind, and of partnership finances in many instances. That is why we pressed hard that these changes should be made. It is essential that we have reassurances on these two points before we pass on. We must have a clear undertaking in view of the rumblings from the Chancellor about the juridical form. I find it hard to believe that the Chancellor had any clue of what the clause was about. The junior Ministers had only a dim understanding and it was left to the Opposition in Committee to give them an explanation.

It being Twelve o'clock, Mr. DEPUTY SPEAKER proceeded, pursuant to order [4th March], to interrupt the proceedings.

Debate to be resumed upon Monday next.

WEALTH TAX

Ordered,
That Mr. John Nott be discharged from the Select Committee on a Wealth Tax and that Mr. Nigel Lawson be added to the Committee.—[Mr. Walter Harrison.]

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Stoddart.]

HEYSHAM-BELFAST FERRY SERVICE

Mr. Robert J. Bradford: It is a sobering thought that today as we debate the proposed closure of the Heysham to Belfast ferry service more than 60 people have received notice terminating their employment on it, and in three weeks time another 120 will receive the same. The issuing of these notices need not have happened and, even at this late stage, the closure of the service need not take place.
I support that statement with three arguments. First, there has been a calculated commitment to the removal of this sea link over a number of years. In other words, a hole has deliberately been made in the base of a bucket and


that bucket has been discarded because it cannot hold water. The express parcels service ceased using the Heysham-Belfast service, and its custom was transferred to the Stranraer-Larne service in October 1973. In that year, however, the Belfast-Heysham service was noted for its excellent handling of that parcels service. Why then was the custom transferred?
Most troop movements use the private enterprise P & O Line to the exclusion of British Rail Sealink. Why cannot British Rail at least share in this traffic? From 1967 sundry traffic was given away. Livestock traffic ceased to be carried on the Heysham route. The lift-on, lift-off service was largely conceded to private enterprise. The proper roll-on, roll-off vessels for container traffic were denied to the Heysham link. A properly-designed vessel has been available for this route since the spring of 1974. The union and the staff involved in the Heysham link requested the use of that vessel, but the request was denied.
These examples are surely concrete evidence that there has been a deliberate run down of the service over a considerable period.

Rev. Ian Paisley: Is my hon. Friend aware that the transport users' consultative committee for the Western Region laid evidence before the inquiry that the brochure printed by British Rail had already omitted the Belfast-Heysham link, so that tourists wanting to use the route this year cannot even know that it exists?

Mr. Bradford: My hon. Friend is quite right and I shall return to that point.
A considerable amount was spent recently on providing ramps at Fleetwood, and millions of pounds have been invested in the initiation of the new service between Larne and Fleetwood. The nationalised dock at Heysham is capable of receiving that container traffic, and manpower is available to run the service, but the operation is being transferred to a completely new route. That is strange action for a Government who claim to encourage nationalisation. If these submissions are inaccurate, I invite the Government to disprove them. It is ludicrous to argue that the Belfast-Heysham route

is not a viable proposition. It is a question of proper management.
There is need for an informed, committed British Rail shipping division management. British Rail closed the service which used to operate from Southampton, and that service is now being worked successfully by private enterprise. At one time British Rail considered axing the Larne-Stranraer route, which has been viable for many years and even now is holding its own. Is it possible that British Rail is arbitrarily initiating a closure on the basis of misinformation? That would be another grave mistake.
It is true that the vessels remain in the dock for about 14 hours, but that is because the wrong type of vessels are in use. I have been assured by the unions and workers that they could turn round vessels within about three hours, so that they could make twice as many journeys and carry a great deal of container traffic, thus making the route viable. Yet management makes no effort to provide the proper vessels to run this important roll-on, roll-off service.
At no time has the shipping division of British Rail consulted the staff or their representatives about the difficulties involved in maintaining the service. That is staggering. As early as 1972 there was notice of closure of the route, but unions and workers were not informed until July 1974. That is not evidence of a committed and concerned management. The lack of communication leaves one with many unhappy thoughts and suspicions. The findings of the transport users' consultative committee to which my hon. Friend the Member for Antrim North (Rev. Ian Paisley) referred have not to this day been published. Yet men have been placed on notice. There are fears that high-ranking members of that committee may have vested interests in a Liverpool stevedoring company. It is also feared that the deputy general manager of the Shipping and International Services Division of British Rail may have interests in a competing service. That is sad and, if true, it is insidious. There is need for an informed, committed management of the British Rail shipping division.
This is the psychologically wrong moment to remove a link between


Northern Ireland and England—indeed, the only link. Not only will many people lose their jobs, but there is no way of absorbing those who will become unemployed in Northern Ireland, where unemployment is double the national average.

Mrs. Elaine Kellett-Bowman: Is the hon. Gentleman aware that the level of unemployment in Lancaster and Morecambe is nearly double the national average at 5·8 per cent., and that the loss of 300 jobs would be a total disaster to our part of the world?

Mr. Bradford: Yes, I am aware of that, and I agree that it spells an ominous future for those who work on both sides of the channel. If stability in Northern Ireland is not too far away, as we all sincerely hope, Northern Ireland needs all the encouragement it can get to bring back the tourist industry and to assist us to increase our exports and to make those export services realistic and attractive. However, the vehicle through which this is possible is now being removed by British Rail—or is being left to somebody else who may want to take the chance of taking on this so-called non-viable route.
Apart from creating a monopolistic situation, this is not the reaction expected of a Government who are well aware of the heroic struggle by the people of Northern Ireland to rise above the destruction of the economy wages in that part of the realm.
The unions and staff assure me that in two years, with the proper vessels, they could make this route into a very viable proposition indeed. It is interesting to note that today British Rail stated its intention to provide the Dun Laoghaire route with three new vessels. It has about £60 million now available because the Channel Tunnel project has been scrapped. We understand that that money is to be used for expansion in other directions. Why cannot two of the three vessels be placed at the disposal of the Belfast-Heysham route—vessels of the kind that will facilitate this modern roll-on, roll-off service?
Therefore we ask the Government to look seriously at this matter. It is now time to take the initiative; to look at the

findings of the consultative committee; to declare the findings of that committee; to consult with workers and management; to look at the facts as they are; and to save this route not only for the people of Northern Ireland but for the kingdom as a whole.

12.14 p.m.

Mr. Leslie Spriggs: I shall try to confine my remarks to only two minutes.
I wish to refer the Minister to Early Day Motion No. 321 "Financial Assistance for Industry (Heysham-Belfast) Ferry Service" which reads:
That this House calls upon Her Majesty's Government to assist by way of financial assistance under Section 8 of the Industry Act 1972 in respect of the Heysham-Belfast Ferry Service.
At the moment the motion contains only one signature, but I understand that by next week quite a number of signatures will have been added to it.
There is no doubt that the Minister has his brief already made out; he will have his instructions what to do tonight. But this is not the end of the road. As a member of the Labour Party and with an interest in railways, harbours and shipping, I believe that one thing we require more than anything is to provide the nation with a comprehensive transport policy. From there we can then do something about harbours, shipping, roads, railways and waterways in general.
This country has a great potential for the building of a really first-class transport system and unless we take proper action the only alternative as has happened under successive Governments, will be to close down any service that fails financially.
When they read parliamentary reports business men must shiver down their spines. I deplore the fact that a first-class service has been allowed to decline. Thirty-five years ago I visited Heysham harbour, and saw that it was working as busily as any beehive. It was a first-class, successful industry, with hundreds of men working there, dealing with cattle, parcel traffic, cars and passengers. Today there are only two out-of-date vessels which have been converted to carry passengers and two or three vehicles. A business of this kind cannot compete with out-of-date equipment. I believe in the statement


which was made during the war—"Give us the tools and we will finish the job." That still applies.
I regret the fact that Adjournment debates are so short. I appeal to my hon. Friend not just to pass over this matter and treat it as something to be buried, nor to send the ships to a place where no one can see them and then to the scrap-yards. Let us do something about this, using the provisions of the Industry Bill if necessary.
I appeal to the House to give the fullest support to the matter and to make sure that every Member of Parliament knows about the Early-Day Motion to which I have referred so that the Government can again be approached.

12.16 a.m.

The Under-Secretary of State for the Environment (Mr. Neil Carmichael): I thank the hon. Member for Belfast, South (Mr. Bradford) for having raised this important subject on the Adjournment, and the hon. Member for St. Helens (Mr. Spriggs) for his comments. I see that other hon. Members would have liked to speak, and I too am sorry that Adjournment debates do not last long.

Mr. Deputy Speaker (Sir Myer Galpern): It should be understood that the Chair does not share the regret at the short duration of the Adjournment debate. I think that there is ample time for it if one hon. Member takes part and the Minister replies.

Mr. Ron Lewis: Will the Minister show appreciation and gratitude by keeping this route open?

Mr. Carmichael: Hon. Members will know that a large number of Adjournment debates are taken by my Department. However, from the number of hon. Members who have stayed behind at this late hour, if for no other reason, I am compelled to realise that this is a very important debate.
A great deal of consideration has been given to this difficult and complex problem, which has not been treated lightly by my hon. and right hon. Friends. However, I wish to try to set out the problems faced by the Government in dealing with the proposal to withdraw this ser

vice, the background against which we took the decisions, and the reasons for the decisions which were taken.
During the 1960s, tourist traffic to Northern Ireland grew very quickly. As we all know, this growth of people going to new places for their holidays was accompanied by an equal growth in the number of families with cars. Not surprisingly, the market for car ferry services from Britain to holiday areas also increased rapidly. Thus in 1968 the British Railways Board, with the approval of the Government, took the decision to adapt its existing passenger-only ships on the Heysham-Belfast service, so as to enable them also to carry cars. The physical construction of the ships made it impossible for them also to carry more than one or two lorries on each trip.
Tonight, criticisms have been laid against the board for this original decision, and there was criticism when the decision was taken. It has been said that it should have invested in new, multi-purpose vessels, capable of carrying goods vehicles in much higher numbers as well as cars and passengers. I do not intend now to go into this question. It is sufficient to say that the decision was taken as a matter of commercial judgment in the light of the best information and advice available and in accordance with the guidelines the Government had then laid down.
The two ships which were adapted, the "Duke of Argyle" and the "Duke of Lancaster", came into service in 1970. The House does not need me to remind it of the sad events which have taken place between the decision to make innovations in this service and the introduction of the service. Those events completely changed the tourist market for Northern Ireland, with a result that the financial situation of the service has never been anywhere near the original forecasts. This is not surprising when one looks at the estimates of the numbers of visitors to Northern Ireland prepared by the Northern Ireland Tourist Board. In 1968, the year when the decision was taken, there were about one million visitors. Last year, there were, sadly, about 300,000. This means that the whole basis of the market for which the service had been planned had disappeared. As one might expect, this has led to very large and growing losses on the service.

Mr. McCusker: I can appreciate that in 1968 there may have been financial reasons for this decision. There may not have been the money available to produce the right craft. But surely the hon. Gentleman does not defend the decision to convert vessels to hold only two roll-on, roll-off container systems as a proper business and commercial judgment. The tourist traffic could have generated business only for, at the most, three months of the year.

Mr. Carmichael: The usage of the shipping services is a matter about which I could go on at length. Even the English Channel ferries are working at anything like capacity for only two or three months a year. Full capacity comes only in a remarkably few weekends in the year.
When I said that the decision was taken not to go for specially built ships, I referred to a commercial judgment. I was not talking about the shortage of money. It was a matter of the Railways Board's commercial judgment of how much traffic the service was likely to carry, taking into account the other services. I hope to be able to explain a little more fully the obligations of the Railways Board's shipping services and the difference between them, and the way that the economics and bookkeeping of the services operate against the railway itself as we know it.
Here, we ought to consider the way in which Parliament has decided that British Railways Board should operate its shipping services. Unlike the railway services—and indeed unlike most other nationalised industries—the Railways Board does not have any monopoly in its shipping services. It is in open and unregulated competition with not merely British shipping companies but also with any other shipping services which wish to join in the business. For this reason, Parliament decided in the 1962 and 1968 Transport Acts that the Government should be given very few controls over the way in which British Rail operates its shipping services, and that these services should be operated within the general commercial remit of the board to cover its costs taking one year with another. In fact, the only powers which the Act gives the Minister over shipping services is to direct in what form notices of withdrawal should be given. In addi

tion, there is a general power to give directions to the board about any of their services if the Central Transport Consultative Committee so recommends.

Mr. Spriggs: In view of the fact that the management of the Railways Board on the shipping side has failed, should not we have a special shipping board with powers to operate and develop the ports which are facing a crisis at the present time?

Mr. Carmichael: I would not agree that by normal commercial judgments the management of the shipping services of the British Railways Board had generally failed. I was trying to point out some marketing facts as regards this service. For instance, there was the large drop in the expected traffic. British Railways were clearly reluctant—

Mrs. Kellett-Bowman: rose—

Mr. Carmichael: The hon. Lady is cutting out what I was hoping to get on the record.

Mrs. Kellett-Bowman: The hon. Gentleman has said that this route is not flourishing because of the unfortunate episodes in Northern Ireland. As it is only for a short time that those episodes are likely to continue, would it not be the simplest matter to bring in a brief Bill to enable money to be put into the route—for example, for two years—until the crisis is over?

Mr. Carmichael: The hon. Lady should realise the extent of the losses. I know that she has had correspondence on this subject with my right hon. Friend the Prime Minister. The losses are estimated at approximately £800,000 a year. That is a considerable sum in these times. Last night on an Adjournment debate a Member was asking for £400,000 for another purpose. On many Adjournment debates Members make suggestions for spending a great deal less than £800,000. There is always the problem of deciding priorities. What happens when the difficult situation in Northern Ireland has changed is a matter that British Railways Board and the shipping section of the board will consider with great care.
I shall not deal with the allegations of corruption that have been raised by the hon. Member for Belfast, South, save to


say that if that is the case I should like to know the source of his information. If the hon. Gentleman cares to get in touch with me I shall be delighted to discuss the matter further. I am very keen on railways and I cannot believe that railwaymen of whatever level deliberately tried to close down—[Interruption.] That is not my experience of the railway people that I have met at all levels.

Rev. Ian Paisley: What were the recommendations of the committee of inquiry?

Mr. Carmichael: I am coming to that.
British Railways were clearly reluctant to conclude that the Heysham—Belfast car and passenger ferry service should be withdrawn. Nevertheless, the time came when the losses which were being incurred were so significant that the future of the service clearly had to be re-examined. Here again, the board looked at a wide range of options. First, it considered operating the service with one ship. The estimates showed that because of the commercial unattractiveness of such a service, which would operate only on alternate days, the loss of revenue would be greater than the saving achieved. Secondly, it looked at various combinations of reductions of service level in summer and winter. Here again, estimates showed that the loss of revenue would be greater than the savings. It looked at the possibility of rationalising the Heysham—Belfast and the Stranraer—Larne services so that the two routes could be covered by three multi-purpose ships. While this plan showed substantial economies by the elimination of one ship, these would have been more than offset by losses of revenue because of the unattractive timings of services which

would have been offered and the loss of lorry traffic on the Stranraer—Larne route.
Finally, the board considered building two new multi-purpose ships capable of carrying lorries on the Heysham-Belfast route. Not only did the board judge that this plan would fail to meet the financial criteria which the Government have to set for nationalised industries investment, but it would still have left a serious loss-making situation. Having exhausted all the possibilities of alternative types of service, British Railways were forced to the conclusion that heavy losses were unavoidable without a substantial recovery in traffic, and they arrived at the broad estimate that an overall increase in current traffic of approximately 80 per cent. would be necessary to eliminate the current loss. They concluded that in the circumstances which they could reasonably foresee there was not any likelihood of such an increase being achieved. They therefore had no alternative—

Mr. A. G. F. Hall-Davis: Heysham lies in my constituency. The Minister is saying that if traffic returns to what could be expected with normal conditions in Northern Ireland the service would be viable. That is the point that we are trying to make.

Mr. Carmichael: If that situation arose the whole question would be opened up—

The Question having been proposed after Ten o'clock on Thursday evening, and the debate having continued for half an hour, Mr. DEPUTY SPEAKER adjourned the House without Question put, pursuant to the Standing Order.

Adjourned at half-past Twelve o'clock.